Brokers need to engage first buyers sooner, says lender

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Brokers should provide potential buyers with advice and tips on how to save for a deposit amid economic uncertainty and rising costs of living, a specialty lender has said.

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

“Brokers should be prepared to go the extra mile and provide practical advice and guidance, such as how buyers can prepare for the financial implications of buying a home and save more easily for a deposit,” said the lender.

“By engaging potential buyers early, they can help set expectations, ensure a good understanding of affordability and risk, and – where permitted – provide advice on cost-saving measures that can help buyers secure deposit together.”

Coventry said initiatives by lenders, such as broadening definitions of deposit contributions, longer mortgage terms and higher income loan caps can help, but first-time buyers looking to get on the l scale will continue to be stretched regardless.

According to the guide, for 22-29 year olds, the average price of a first-time buyer was six times the average salary in 2012. But in 2021, this ratio was on average 7.4.

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

“Rising property prices have outpaced earnings growth for more than two decades,” Coventry said.

“A moderate improvement in price and wage ratios, however, will do little to address the fundamental affordability challenge faced by first-time buyers.”

With house price growth ending in double digits in 2021 and growth continuing into 2022, forecasts suggest that growth will halve by the end of the year.

Figures from the Office for National Statistics showed house growth began to return to single digits in March, rising to 9.8% from 11.3% in February.

Affordability was also eased by the Bank of England this week. He said Monday (June 20) that in August he will no longer require lenders to hold in place a 3% interest rate hike stress test for potential borrowers.

The removal of the test, which has been in place since 2014 to prevent homebuyers from mortgaging more than they can afford, has been called by some brokers ‘irresponsible’ at a time of rapidly rising rates and cost of living crisis.

In the Coventry guide, he highlighted the opportunity first-time buyers represent for lenders and brokers in the years to come.

First-time buyer sales accounted for three in 10 real estate transactions (29%) in the four years to January 2022, according to the lender’s calculations.

Over the same period, he said the average value of new first-time buyer loans had increased by almost a fifth (18%).

By 2024, the value of the first-time buyer economy is expected to total £73.1 billion, according to data from the Center for Economics and Business Research.

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