How to advise first-time buyers

As FTBs have less experience there is a bigger conversation to be had between the client and adviser.

“Do they understand the legal side, for example, or the need for a solicitor approved by the lender?” asks Mr Murphy. “Have they considered the differences between valuations and home buyer surveys and which information would be of most use?”

Fees and extra costs can be substantial and FTBs are often not focused on when these are payable and if they will have money to hand. It’s also important to understand if any existing credit commitments will continue too.

Jonathan Clark, mortgage partner at Chadney Bulgin, opines that “in some ways FTB’s are easier to advise as they don’t have so many pre-conceived ideas and therefore tend to be more responsive to your advice, but this does mean that you will have to spend more time with them and maybe do things at a ‘gentler pace’.”

FTBs generally have less equity, so by nature borrow a larger proportion of the purchase price. As a result a different range of mortgage options are available, often lacking the variety offered to those already on the property ladder.

But there are of course a range of products designed exclusively for such clients, including loans with no product fee, help with legal costs and help with the cost of the property valuation.

But while some lenders limit FTBs only to specific products, others allow them to choose from across the full range of product deals, including different combinations of terms, LTV ratios, fee options and incentives such as free valuations.

With FTBs there is also the ‘bank of mum and dad’ to consider - and parents can provide a fall back as guarantors.

Ignoring the ‘parental assistance’ type schemes, Mr Clark says that 10 per cent deposit is all that is needed to obtain reasonable terms these days. Income multiples are typically between four and five times annual salaries.

“However, clients should try not to commit more than a third of their net home pay to mortgage costs, fix for the first two, three, five years and they shouldn’t go wrong.”

The latest data from the Council of Mortgage Lenders (CML) reveals that the average LTV ratio is 80 per cent but one in five FTBs borrowed 90 per cent or more towards the end of 2012, while one in 40 took out a 95 per cent mortgage.

The FSA requirements for advice in this are, says Mr Clark are that all clients should be afforded the same level of care and guidance to ensure they make an appropriate mortgage choice as recommended by the adviser.