"The profile of the typical first-time buyer has also evolved. It’s no longer a couple in their 20s starting out on their career and looking to buy their first flat."
Hinckley & Rugby has helped generations of first-time buyers get the keys to their first home. As a mutual building society, this is part of our DNA.
But in recent years, the mortgage landscape has become significantly more challenging for those aspiring to be homeowners. Average property prices have marched ever upwards, outstripping the growth in average earnings and stretching affordability for many.
And while this house price inflation may have stalled in the last two years, life has not got easier for would-be homebuyers, with a big jump in interest rates pushing up mortgage costs. At the same time, rents have skyrocketed across the UK, which, combined with rising living costs, has made it harder than ever to save for the sizeable deposits that are often needed.
It isn’t just the housing market that has changed in recent years, though. Working patterns have also shifted, with more people working on a self-employed basis or on shorter-term or zero-hours contracts.
As a result, the profile of the typical first-time buyer has also evolved. It’s no longer a couple in their 20s starting out on their career and looking to buy their first flat. Today’s first-time buyers might be in their 30s or 40s and looking for more secure housing for their family. It will also include people buying with friends or siblings as a means to help them get on the housing ladder.
At Hinckley & Rugby for Intermediaries, we want to offer a range of mortgage products that reflect these more complex new realities and can help the far more diverse range of first-time buyers we see today. In many cases, we feel the mortgage industry has not always offered sufficient support to first-time buyers, and we want to do something different.
Our revamped Income Flex product has been designed to do exactly this. The extended criteria mean that it now offers a maximum 95% LTV, making it ideal for first-time buyers.
There are obviously other mortgage products on the market at this LTV, but ours is the only one that also offers an ‘income booster’, specifically designed to help first-time buyers with daunting affordability calculations.
The allows buyers to borrow up to 5.5 times their income, with no minimum income requirement. What is key, though, is that this income can include earnings from a variety of sources.
Income Flex does not just offer mortgages to contractors and the self-employed; it also takes into account bonus payments, regular overtime, commissions and dividend payments from those who have started their own businesses. We also take into account benefits and tax credits and investment income.
Criteria on these issues are far more generous than on standard mortgage offers. For example, most lenders will only factor in 50% of bonus or commission payments, and these will have to be evidenced over a two-year period. With our Income Flex product, we can take into account these payments in full and need just one year’s evidence.
This can make a significant difference when this income is combined with the higher multiples, effectively allowing first-time buyers to ‘flex’ their earning potential, stretch their earnings and clear affordability hurdles.
This flexibility is baked into the product, so we will look at these various income streams on a household basis. This might be a couple buying their first home together, but it could equally be friends buying together, siblings pooling resources, or a parent helping their grown up child.
All cases are manually underwritten, helping us take a more individual and informed view of cases that might fall outside published criteria. We want to be able to say ‘yes’ on as many lending decisions as possible, particularly when it comes to first-time buyers. So let us know about clients that have a ‘side hustle’ — be it selling craft items on Etsy, tutoring, or dog-walking.
It’s important to note that Income Flex is not solely a first-time buyer product, but will be able help all buyers with non-standard income buy the home they deserve. It is also worth noting that the higher LTV on this product will also help ‘first again’ buyers — which can include those looking to buy property after a divorce or relationship breakdown.
Of course, some first-time buyers will be on more stable career paths with regular jobs and a monthly payslip. The high LTVs and generous income multiples on Income Flex may make this a suitable product, but brokers may also want to consider other Hinckley & Rugby mortgage options, particularly for those getting help from the Bank of Mum and Dad.
Income Flex is just part of the range of specialist mortgage products that Hinckley & Rugby now offers. We want to help brokers help their clients by finding lending solutions to difficult-to-place cases. Life has become more difficult for first-time buyers, but we hope our innovative products will at least make getting a mortgage a bit easier again.
