"What may actually move the dial for first-time buyer numbers is already coming to fruition, namely lower rates, a greater number of higher LTV product numbers, and potential purchasers having less issues with affordability criteria"
Politically there has been a considerable amount of focus on the Government’s future plans, and what it might announce at the 30th October Budget, in recent weeks.
Keir Starmer and Rachel Reeves have been doing their best to ‘roll the pitch’ for what is anticipated to be some pretty ugly announcements. When you say that things are going to get worse before they get better, then it’s highly unlikely we’ll see anything to warm the cockles of most sections of society.
My feeling is that, if Labour are true to their word and we are going to see some pretty difficult tax and spend measures introduced, then they will have to at least counter this with some more positive – and relatively inexpensive – announcements.
Of course, schemes for first-time buyers would probably fit this bill quite well, in that it costs the Government relatively little, and actually could bring in more tax ‘dollar’ than it actually costs. The question is, apart from building more homes, what could it do?
In its manifesto, Labour committed to a further guarantee scheme which might be a little more attractive to lenders than the existing one but it remains to be seen whether it will be cheap, or flexible enough, for lenders to use. I suspect it won’t.
The new Government might look again at a replacement for Help to Buy but again there are private alternatives, such as Deposit Unlock, already available and it might be more economical for it to simply support these more, and encourage more lenders to get involved.
Or it might look at further stamp duty incentives. We know that the more generous stamp duty threshold change is due to run out at the end of this tax year, and there’s been nothing to suggest this will be extended, but in search of more positive news, it might feel it can do this.
Overall, however, there is unlikely to be any ‘big ticket’ announcements for a number of reasons – there isn’t any money to throw at them, and what may actually move the dial for first-time buyer numbers is already coming to fruition, namely lower rates, a greater number of higher LTV product numbers, and potential purchasers having less issues with affordability criteria in order to secure a mortgage.
All three have been ticking in the right direction, particularly rate levels and affordability, and the next year or so looks likely to deliver further cuts in pricing which will of course aid those seeking to get on the ladder for the first time.
Which leads me to the latest figures with regards to high LTV product numbers, and I’m pleased to say that we have seen a healthy increase over the course of the last month.
Using Nationwide’s most recent average house price figure of £265,375, which leaves a 5% deposit requirement of £13,269, we can see that 95% LTV product numbers rose from 237 in August to 253 at the start of September. This is made up of 222 fixes and 31 trackers/discounts/variable products and perhaps shows an increasing appetite for lenders to attract this business.
The next few months are clearly an important time for lenders not just in meeting 2024 targets but also in terms of how they start 2025, and it wouldn’t be surprising to me if we did see a further increase in product numbers, in an area where there is a strong demand from would-be first-time purchasers.
As usual we look at the ‘Best Buy’ options and there have been rate drops here which suggest a direction of travel that will be uniformly welcomed, particularly if this continues.
Skipton now have a 4.59% five-year fix available, while Progressive’s Northern Ireland-only 4.99% five-year fix remains, followed by a 5.05% Lloyds’ deal. Neither the Skipton or Lloyds deal were in the top three last month.
Skipton also top the two-year fixed-rate charts with a 4.99% deal, while Monmouthshire have a 5.45% three-year mortgage available – both these rates were better than the lowest rate available last month.
In the discount/tracker space, the Loughborough’s three-year discount remains at 5.15%, the Newbury Building Society offer a three-year discount at an improved 5.19% - due to the base rate drop, while Progressive offer a two-year discount at 5.25%.
Overall, it’s a more positive outlook than we had just a month ago, and of course much of this will be down to the cut to BBR we saw at the start of August, and perhaps an anticipation that the Bank of England’s MPC might well act again at least once more before the end of the year.
First-time buyers remain a strong borrower demographic to target, not least because they are motivated and house prices aren’t necessarily moving further out of reach for them. Lenders look likely to continue to target them in the months ahead, and for advisers it therefore makes sense to get their marketing messages right in order to secure the business opportunity that clearly exists.
