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Home Malone – will FTS focus be a best seller?

Premier Mortgage Services managing director John Malone thinks he has an idea that could not only save the first-time buyer property market but could also kickstart the market as a whole as it reaches a dull, flat period.

Now that has got your attention, hasn’t it? Indeed, Malone says this idea has already got lenders sitting up and listening. The scheme is for the FTBs to be helped not by the Government, not by rising stamp duty levels or creating newbuild homes but by shifting attention from the FTBs altogether, to the first-time sellers.

If there are suitably packaged products specifically for this sector, it will be easier for first-time sellers to move on to the next rung of the property ladder and there- fore free up suitable and affordable housing for FTBs says Malone.

The premise is undeniably simple but it has not been voiced by many, certainly not the economists or the media who continually beat the drum of the plight of the FTBs.

Malone believes products for first-time sellers should be tailored with certain restrictions. They should only be available to first-time sellers. There must be a sale and a purchase taking place at either end of the deal and there must be a discriminating price range – first-time sellers with properties with a 1m price tag need not apply.

Malone also suggests that surveyors and conveyancers should comprise a panel exclusively appointed to the scheme on the strength of their willingness to support it through scaled fees.

Bradford & Bingley head of product operations David Bitner says: “This certainly is a unique way of looking at the market. The cost of moving up the ladder has increased significantly and has suddenly become prohibitive.

“The Government has given very little thought to the fact that people need to be mobile without having to factor in 15,000 to 20,000 in costs in doing so. A 22 per cent taxpayer can find 50 per cent of yearly disposable income eaten up just by the cost of moving. There might be an opportunity here for niche products but lenders have only specific amounts of margin. There is so only so much help that they can give towards these extra costs.”

Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi envisages some initial problems despite commending the idea. He says the main problem is identifying which customers are first-time sellers.

More controversial is the idea to offer mortgages specifically for these customers. Yousefi says: “Consumers and brokers may not be happy about products being made available exclusively to first-time sellers.”

Malone also says that problems with the current trends in the market are stopping first-time sellers from moving. He believes the main issue is with the focus on remortgaging. “How much longer can lenders survive on remortgaging? Something has to be done quickly about this,” says Malone.

Yousefi does not agree that the industry is overly focused on remortgaging. He says: “I would disagree with John’s analysis. There are some fantastic deals out there, especially on fixed rates.”

But the Council of Mortgage Lenders’ figures back Malone’s assesment. In its figures for February, FTBs accounted for around 30 per cent of loans. Lending for house purchase made up only 39 per cent of total mortgage lending – the lowest proportion since May 2003 and the second-lowest figure that the CML has on record.

Remortgaging accounted for 49 per cent of all loans with 8.5bn worth of loans in February. Total loans for house purchase amounted to 6.7bn. The CML expects remortgaging and further advances to account for more lending than purchases for the time being.

Hamptons International Mortgages managing director Kevin Duffy has little doubt in his mind that Malone is on to a winning formula. He says: “Let’s face it. First-time sellers represent a huge underbelly of homeowners who are every bit as repressed as FTBs.”

For Malone’s idea to work, there needs to collaboration from lenders, packagers and mortgage intermediaries must have a say too. Malone says lenders are already showing interest in what he has to say, citing A&L, Abbey, C&G and Northern Rock as perfect candidates to cater for this sector.

Cheltenham & Gloucester press officer Sue Knight says: “I think the packages that we already offer for first-time sellers do exactly what John Malone is suggesting. We do not have higher lending charges and we offer 95 per cent loan to value.

“What you have to remember is that this is also down to confidence. First-time sellers have to want to move up the ladder. In fact, every step of the chain has to want to move for this to work.”

Scottish Widows Bank managing director Graeme Hartop says: “This is very interesting and I understand what John is trying to achieve but it will only work for FTBs in certain parts of the country. The fact remains that FTBs do not have the money to get on to the property ladder in the first place. I think it is important for lenders to continue to focus on FTBs.”

Duffy wants mainstream lenders to give a first-time seller scheme genuine support and quickly. Malone says he already has Abbey and Halifax listening intently and he continues to speak to other interested parties.

He says: “We need to create the food chain in the property market. What a lender wants is turnover but the lending market is struggling because it is focusing on remortgaging. I want to motivate the purchase market.”

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