You would be forgiven for feeling a little pessimistic with the way the mortgage market has been shaping up recently. Data from a variety of sources has painted a bleak picture, sentiment generally has been negative and while the British public has not fallen out of love completely with mortgages yet, it is fair to say that the relationship is rocky.
The stats also confirm it is first-time buyers that are bearing the brunt. The CML’s recent mortgage lending figures seemed to reflect an increasing trend towards the exclusion of the under-35 age group from the housing market.
According to the CML, the average age for firsttime buyers has risen to 37 this year compared with 31 in 1981, with a growing number of younger people being forced into rented accommodation or living with family.
A survey by the Legal and General Mortgage Club revealed that the lowest age group of homeowners was the 19-25 age group, accounting for a mere 13 per cent of all homeownership in the UK.
The proportion of those Brits who say they will buy a property in the next 12 months has fallen from 37 per cent in 2010 to 30 per cent in 2011. Forty-four per cent of the 2011 sample were renting and, of this group, 30 per cent said the main reason they were unable to get on the property ladder was an inability to get an affordable mortgage.
Clearly, affordability relative to salaries is still an issue and it is preventing many Brits from realising the dream of homeownership. Inflation eating into disposal incomes, the perceived lack of mainstream mortgage products with realistic LTVs and fears over the wider economic outlook are dissuading purchasers.
However, the outlook may not be as negative as it appears. It is more than likely that it reflects a lack of consumer confidence in the housing market rather than a lack of availability of suitable products for the needs of first-time buyers. We are seeing help emerging for beleaguered borrowers in the shape of smaller lenders still offering 90-100 per cent LTVs. Innovation in the mortgage sector is often driven by smaller players and some of the most interesting products we have seen recently include the 100 per cent LTV mortgage from Aldermore and the 95 per cent deal recently available from Cambridge Building Society.
These smaller lenders often take a more “human” view on how much customers can borrow, using individual underwriters rather than machine judgements, and advisers may well find options open to clients via this route. Such moves may well go some way to healing broken-hearted buyers but until the mainstream lenders re-enter the market at these levels, we expect it to remain challenging but not impossible for buyers.
However, we need some of the big boys to start making moves towards higher LTVs to really start to see a recovery. So, while the picture is not as bleak as same may have you believe, we will only see sentiment change when the lending leviathan’s start dipping their toes back in the water.
Ben Thompson is managing director of Legal & General Mortgage Club