First-time buyer mortgage completion rate at three-year high

First-time buyers (FTBs) saw their completion rate for mortgage offers through intermediaries reach a three-year high of 89% in Q4 2018.

That is according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA).

The tracker revealed that the rate of completed mortgage offers for FTBs handled by mortgage intermediaries increased by eight percentage points from 81% in Q3 2018 to 89% in Q4 2018.

These figures are 20% higher than in Q1 2016, when mortgage brokers reported that only 69% of FTB offers reached completion.

The rise in intermediary activity comes after UK Finance found that the number of FTBs securing mortgages in 2018 reached its highest annual level in 12 years. Some of the recent growth in FTBs has been attributed to the growth of Help to Buy allowing younger people to get on the housing ladder.

According to the latest government figures, Help to Buy fuelled around 1,000 home purchases a week in 2018. This, grouped with a competitive mortgage market, subdued house price growth and strong jobs market make up the major factors in the continued growth in FTB lending.

Intermediary mortgage businesses saw strong end to 2018

Mortgage intermediaries also reported stronger completion rates across the board in Q4 2018, with an increase of five percentage points up to 87% from the previous quarter. This is also the highest overall reported completion rate recorded by the IMLA tracker.

Remortgage activity also ended strongly in 2018 with quarterly figures up by 4% in Q4 to 87%.

The last quarter of 2018 also saw positive buy-to-let lending, even in the face of increased landlord regulatory obligations dampening the sector. Offers to completion rose three percentage points to 85%, according to intermediaries.

IMLA says this positive trend for broker business looks set to continue in 2019 despite Brexit concerns. The firm recently predicted that mortgage lending via intermediaries will rise to £169 billion this year as the share of lending introduced by intermediaries rises to 75% in 2019 and 76% by 2020.

Brexit concerns still linger

However, despite such positive figures, IMLA’s tracker found that broker confidence has dwindled a little as brokers continue to experience a Brexit ‘uncertainty effect’.

Mortgage intermediaries recognise that Brexit has the potential to negatively affect their businesses, with the percentage of brokers who claimed to be ‘very confident’ about their own business falling from 60% to 54% in Q4 2018 – the second dip in confidence in as many quarters.

The IMLA Mortgage Market Tracker – which uses data from BVA BDRC – examines consumers’ success rating in securing a mortgage via the intermediary channel, by tracking progress from initial expression of interest (seeking a ‘decision in principle’) through to completion.

In doing so, it compares the fortunes of first-time buyers, home movers, remortgagors, buy-to-let borrowers and applicants for specialist loans.

“It is encouraging to see that when an intermediary does apply for a loan on their client’s behalf, they are being accepted and completed at growing rates,” Kate Davies, executive director of IMLA, commented.

“Mortgages going from offers to completions are at more than three-year highs as intermediaries and lenders continue to find solutions for clients.”

She said that in a time when helping first-time buyers to navigate the complexities of an increasingly competitive and complex mortgage market, it’s significant that intermediaries are able to demonstrate such a high success rate.

“This is particularly true for those taking out Help to Buy equity loans, who may need even more expert guidance,” she added.

“Even in the face of such strong evidence about brokers’ effectiveness, it’s not surprising that brokers themselves share the current general uncertainty about the future. But, whatever the outcome of the current Brexit negotiations, we are confident that brokers will continue to play an essential part in guiding borrowers through the market.”