Vital to our business in 2021 will be our first time buyers

There remains a strong demand from first-time buyers, but broker support is needed more than ever, says Carolyne Gregory, director of retail lending at Platform, part of The Co-operative Bank.

40% of our mortgages in 2020 are from our first-time buyer business – well above the industry average of 26%.

So why has it been so much higher for Platform and will it remain that way in 2021?

Visible and flexible

We’ve remained active in the high LTV market, which was obliterated in the second quarter of last year.

There were 779 mortgage deals available at 90% LTV on 1 March 2020, according to Moneyfacts, but by July 2020, just 70 remained.

As lenders go back to high LTV lending the numbers of 90% LTV deals are slowly rising, reaching 248 in February 2021. At Platform we worked hard to maintain a presence in the 90% LTV market for most of last year, and now offer a full range of 90% LTV products.

A new mortgage guarantee scheme on mortgages up to 95% was announced in last week’s Budget and will be launched in April. It will boost high LTV product numbers, and you will probably be contacted by clients who have read about it. The scheme is great news for first-time buyers and homemovers alike and will help access for those without a large deposit.

But of course, borrowers will still need to prove that a 95% mortgage is affordable, and lending criteria is currently tight, so they may not be accessible to every client that wants one.

Importantly, at Platform we combine high LTV lending with underwriting each case on an individual basis, so we can help more of your clients get onto the ladder.

That’s set to become particularly important in 2021 as the financial impact of the pandemic starts to be more widely felt.

High demand

One reason we’ve seen a high proportion of first-time buyer business at Platform is that, while supply of high LTV deals has been limited, demand has remained relatively high.

First-time buyer business has proven itself resilient time and again in the face of high property prices, squeezed affordability and now Covid-19.

Owning your own home has arguably become more important than ever, as more people are now working from home. We’ve already seen a noticeable shift last year in the type of homes our mortgage borrowers want to buy and where they are located.

A recent survey by Trussle said that 71% of first-time buyers plan to buy a property in towns, suburbs and rural locations, with just 29% considering cities. Affordability barriers still remain, but those wanting to get on the property ladder will do it – they’re just finding different ways of doing it in different places.

Smaller market

The third reason our first-time buyer lending business rose as a proportion is simple – it accounted for a larger slice of a smaller pie.

Overall lending fell last year and it’s important to recognise that and to adapt, because brokers and lenders need to make the most of the business that comes through the ‘virtual’ door.

Remortgaging has fallen as a proportion of our business as well as across the market – by £12bn to £27bn from 2019 to 2020 according to UK Finance.

In 2021, we could see more borrowers finding themselves unable to remortgage as the financial impact of the pandemic plays out. If government support starts to be withdrawn and we could see rising unemployment and credit defaults as a result, making product transfers the obvious choice.

In other words, we’re not necessarily seeing a first-time buyer boom – they’re accounting for a larger proportion of business as other areas reduce. That could grow further as a proportion of lending, as the stamp duty holiday ends in June on purchases to £500,000, and in September on purchases up to £250,000, while the first-time buyer exemption remains in place.

Maximise FTB business

Make sure you can support first-time buyer clients by having up to date knowledge of what’s available to them, including the new mortgage guarantee scheme and Help to Buy (2021-23).

This might mean looking at more flexible lenders that will take time to assess your clients and look at the bigger picture of their finances.

Automated underwriting is going to exclude many borrowers in the current climate, where so many people have been financially affected by the pandemic.

At Platform we support high LTV lending and underwrite each case individually. Our new professional mortgages also offer enhanced income multiples up to 5.5 times income and up to 90 per cent LTV to borrowers in certain professions, such as accountants, doctors and solicitors.

In a year when remortgage business and home mover business may well be limited, it makes sense to do all you can to maximise first-time buyer conversions. A good relationship with a specialist lender could prove an essential part of your tool kit.