First-time buyers turning to specialist lenders

New data from mortgage lender, Vida Homeloans, found more first-time buyers are seeking lenders for deals that cater to their needs and are not available from high-street lenders.

The advent of new lenders and a wide variety of products has resulted in first-time buyers (FTBs) getting their foot on the property ladder by using gifted deposits or buying with family and friends.

Vida Homeloans statistics reveal a significant proportion (42%) of its residential purchase customers have been FTBs since the company’s launch in October 2016. This is in line with the Council of Mortgage Lenders (CML) data showing that the number of FTBs over the last year has surpassed the total of home movers for the first time since 2006.

The lender has loaned FTBs an average of £171,000 per purchaser, which is over £35,000 more than the average loan amount quoted by the CML.

Louisa Sedgwick, Director of Sales, Mortgages, Vida Homeloans commented: “The data we have gathered since last October shows that first-time buyers are taking advantage of the wide range of products and specialist options in the market currently, despite the near constant commentary suggesting buying your first home is becoming out of reach for some would-be FTBs.”

“We have been amazed by the numbers of FTBs we have lent to already and we’re really proud to help them become homeowners.”

This practice of FTBs exploring their options in the wider market and pursuing specialist lenders proves that these types of purchasers are deprived of the criteria-driven lending that new market entrants are providing.

A third of Vida’s applications have used gifted deposits from close relatives, while two-thirds were among a maximum of borrowers getting together to purchase a property. Over a third are self-employed and find types of property – such as flats above commercial premises – are an important consideration. Not all FTBs are maximising their LTV, with the majority borrowing below the 85% maximum.

Sedgewick continued: “Whilst this is encouraging news for those buyers who are able to get onto the ladder, more needs to be done to promote the affordability of home ownership to those who have so far felt unable to purchase their first property.”

“Brokers play a crucial role in ensuring first-time buyers pursue home ownership and don’t get deterred at the first step, which can often be a knock-back from high-street banks. Brokers need to be considering the wide range of products or features on offer, allowing those budding home owners to become real FTBs.”

Sedgewick offered her final words: “As the mortgage lending market continues to evolve with greater product innovation, borrowers need to be aware they can take advantage of the various choices available to them and should be optimistic about purchasing their first house.”