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Break down FTB barriers


I hardly need to tell the mortgage broking sector that first-time buyers are the foundation of the market but it is important that we remind ourselves of the imperative to overcome their barriers to entry. They remain the most important group, no matter what market conditions are. Without this first cog turning successfully, the machine will not work.

A 2010 survey by YouGov says there are 1.4 million households in the UK that aspire to own a home but are unable to do so. Data from CML reveals that 80 per cent of FTBs under the age of 30 have had to ask the bank of mum and dad for help. This is a substantial increase on the 45 per cent in need of parental help before the credit crunch. In the second half of 2010, If I Were You found that 91 per cent of FTBs had resorted to borrowing from friends and family.

One startling statistic at the heart of the problem is that the proportion of mort-gages given to FTBs with less than 10 per cent deposit was just 2 per cent in the first part of 2010, says the Chartered Institute of Housing. That is a fall from 60 per cent in 2006. Yet many parents cannot afford to support their children or can only do so by remortgaging their own home.

Some lenders are trying to do their bit. Already this year, we have seen a handful of them releasing appealing 90 per cent LTV deals. Halifax launched an FTB deal at a rate of 5.79 per cent, which it says saves an average of £2,000 in costs.

Homebuilders have also offered alluring incentives for parents who want to support their offspring in buying a new home. Persimmon launched the Parent Payback scheme, whereby parents con- tribute up to 20 per cent of the purchase price of one of Persimmon’s homes and get 5 per cent interest on this investment for two years. Bovis has also set up a similar deal called Jumpstart.

Another significant initiative came from Britain’s biggest housebuilder, Barratt Homes, which, together with Hitachi Capital, released its Helping Hand scheme. Parents apply for an unsecured loan of up to £50,000 from Hitachi, which can be used as the deposit on a Barratt home. At a rate of 5.4 per cent, with no early repayment charges and permitting overpayments without penalty, the deal seems reasonably priced. This innovation means that parents have an alternative to remortgaging.

In many ways, now is an ideal time to buy. Interest rates are at an all-time low and property prices remain great value while rents are at an all-time high.

It is good to see developers and lenders seeking fresh ways to overcome FTBs’ barriers to entry. With more initiatives such as these and the confidence that increased FTB activity should deliver, we will see a more prosperous period. First-timers will always have concerns and questions and while the modern solutions of social media and comparison sites will play a useful part, there is no doubt that mortgage brokers provide a lifeline. Stay abreast of all the options available to FTBs and do your bit to get that critical component of our market back on its feet.

Rob Clifford is managing director at If I Were You


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