First time buyers are the lifeblood of a thriving property market, but high interest rates and the impending Stamp Duty changes have added to the hurdles they face.
In a recent IFA Talks podcast, Claire Askham, Head of Mortgage Sales at Buckinghamshire Building Society, shared her insights on how we can keep this vital part of the market moving.
Want to read more about the FTB market? Check out Claire’s latest blog on IFA Magazine Here
The impact of impending Stamp Duty changes
Affordability has been a concern for a while now, and particularly since the rise in interest rates following the mini budget in September 2022.
This has been further exacerbated by the changes in Stamp Duty thresholds, which will return to £300,000 for first time buyers on April 1, down from the current £425,000.
Claire said: “We are definitely seeing an increase in first time buyers, but with some moving their plans forward to try and beat the changes, they might not necessarily have the affordability they need. So they find themselves in a ‘catch 22’ around how they can move forward.”
How lenders can help with the affordability challenge
Over the past 12 months, Buckingham Building Society has spent a lot of time listening to brokers and exploring data and trends to see how it can further support challenging areas of the market, such as first time buyers, in order to keep it moving.
This included becoming the first building society to launch an option that helps with both the deposit and affordability challenge.
JBSP Deposit Lite combines two products to make it easier for parents to help their children buy a home. It comes with low to no deposit options, enabling borrowers to purchase their first property by leveraging the equity from parental property. This could also be a holiday home or buy to let property, subject to individual approval.
Then to assist with affordability, up to two parents can also join the mortgage, significantly improving the buyers’ borrowing potential, but without the need for them to be co-owners of the home.
This is just one of a series of measures designed to overcome some of the barriers that brokers said their clients were facing.
“We started seeing deposits being gifted from wider family, so we also extended our criteria to include gifted deposits from aunts, uncles, step parents, brothers and sisters,” Claire explained.
“We’ve also made changes around affordability. Some customers have two jobs; they might have self-employed income, as well as employed. They may be commission-based or do a lot of overtime. All these types of income we can accept to help support the affordability.”
The importance of open communications
With so many moving parts and different parties involved, Claire stressed the importance of maintaining open communications all round. This can help ensure expectations are managed, especially when buyers are trying to meet a deadline, such as a legislative change.
“We’d advise anyone with a deadline to let us know straight away, and to support that with all the relevant documentation as quickly as possible. I would also highlight the importance of managing expectations. So if there is a deadline, advisors need to have that conversation with the client to find out what their back-up is if things don’t go according to plan. For example, with the Stamp Duty change, do they have other options for bridging the gap if it doesn’t happen for any reason.
“As an industry we have lots of changes thrown at us and tight deadlines to work to, but if you manage expectations and keep engaging with the lender, then we’ll always do what we can to hopefully get a case over the line.”
The Buckinghamshire ‘common sense’ approach
Buckinghamshire Building Society adopts a common sense approach, with cases looked at manually and on an individual basis, including where there might be impaired credit or non-standard credit issues.
Claire explained: “Our passion is helping people achieve their homeownership dream. We don’t put anything through a ‘yes, no’ system. Every case is assessed by a human being so we can understand the story behind the application. This gives us the flexibility to help those people who probably thought home ownership was never going to be achievable.”
