Brokers must engage first-time buyers earlier, says lender

In its latest guide for brokers, Coventry for intermediaries said brokers need to do more than just advise clients when new, favourable products are launched.

“Brokers must be willing to go a step further and provide guidance and practical tips, such as how buyers can prepare for the financial implications of buying a house and more easily save for a deposit,” the lender said.

“By engaging potential buyers early, they can help set expectations, ensure good understanding of affordability and risks and – where allowed – provide guidance on savings measures that can help buyers get a deposit together.”

By supporting first-time buyers before, during and after buying a home, brokers really demonstrate their value to new borrowers.Jonathan Stinton, Coventry for intermediaries

Coventry said lenders’ initiatives, such as widening definitions for deposit contributions, longer mortgage terms and increasing loan to income caps can help, but that first-time buyers looking to get on the ladder will continue to be stretched regardless.

The guide calculated for those aged 22-29, the average first-time buyer house price stood at six times average earnings in 2012. But in 2021, this ratio averaged 7.4.

For the 30-39 age group, meanwhile, the ratio rose from 4.5 to 5.9 over the same period.

“House price rises have outpaced earnings growth for over two decades,” said Coventry. 

“A moderate improvement in price and wage ratios will not do much to address the fundamental challenge of affordability facing first time buyers, however.”

While house price growth finished in double-digits in 2021 and such growth continued into 2022, predictions suggest growth will halve by year end.

Figures from the Office for National Statistics showed house growth starting to revert back to single digits in March, from 11.3 per cent in February to 9.8 per cent.

Affordability was also eased by the Bank of England this week. It said on Monday (June 20) that come August, it will no longer require lenders to keep a 3 per cent interest rate rise stress test in place for prospective borrowers.

The removal of the test, which has been in place since 2014 to prevent home buyers from mortgaging more than they can afford, has been labelled by some brokers as “irresponsible” during a time of rapidly rising rates and a living cost crisis.

In Coventry’s guide, it highlighted the opportunity first-time buyers pose for both lenders and brokers in the years ahead.

First-time buyer sales accounted for three in 10 (29 per cent) property transactions over the four years to January 2022, according to the lender’s calculations.

Over the same period, it said the average value of new first-time buyer loans rose by nearly a fifth (18 per cent).

By 2024, the value of the first-time buyer economy is set to reach a total of £73.1bn, according to data from the Centre for Economics and Business Research.

“With the first-time buyer economy set to reach £73.1bn in the next two years, and first-time buyer mortgages accounting for three in ten property transactions on average, there is a clear need for advice and education, and this presents an unmissable business opportunity for brokers,” said intermediary relationships at Coventry for intermediaries, Jonathan Stinton.

“By supporting first-time buyers before, during and after buying a home, brokers really demonstrate their value to new borrowers. 

“Educating new buyers on the need to budget for additional costs, and going above and beyond to deliver quality service when there is a clear need for it can create life-long relationships with new clients, helping to secure repeat business and word of mouth recommendations.”

ruby.hinchliffe@ft.com