Written by Rob Lankey, National Sales Director, Afin Bank
First-time buyers are vital to stimulate a thriving mortgage market, but at the moment, it feels like new buyers are being let down by mainstream lenders.
Part of the issue is the challenges that FTBs have always faced, such as rising house prices, bigger deposit demands and tight affordability. But look closer, and you’ll see that the real problem is that lenders aren’t keeping up with how first-time borrowers are changing.
The way people work and their income patterns have evolved post-Covid; new buyers are looking to family to help with their deposits; and buyer demographics are changing with more professionals, as well as workers from overseas looking to put down roots in the UK.
These different circumstances are not that unusual, but unfortunately many lenders are still applying an automated “tick box” approach created for FTBs five or ten years ago. The risk is that good quality customers who deserve a mortgage, but who don’t fit into the cookie-cutter mould of a “standard borrower” are being let down by an overly rigid approach to underwriting, potentially stifling the property market.
Afin Bank was initially created to help people from overseas living and working in the UK on a valid work visa who often struggle get a mortgage because of a lack of UK credit history or because lenders want a longer time period remaining on the applicant’s visa. We overcome those challenges by using an individual underwriting approach that looks at the client’s real financial position, as opposed to employing an automated model, to offer them a mortgage to match their affordability.
But we realised we could also help so many other people, particularly first-time buyers, who can struggle to get a mortgage because of their individual circumstances, like the self-employed, contractors and qualified professionals.
Take, for example, the 2.9 million self-employed workers who contribute £366 billion a year to the UK economy. The type of work they do is changing, with a 29% increase in people working in caring, leisure and other service occupations in 2024 compared with the previous year.
Over the same period there was also a 4% rise in administrative and secretarial workers, 2% growth in managerial freelancers and a 2% growth in associate professional and technical occupations.
However, the number of solo self-employed in skilled trades fell by 4% between 2023 and 2024, sales and customer services workers dropped by 10%, and lower-skilled elementary occupations fell by 8% over the same period.
By September last year, there were more than 1.3 million workers in the UK with a second job, around 3.9% of all people in employment. There were also 460,000 people with ‘side-hustles’ in 2024, 20% higher than the previous year, equal to 11% of all self-employed in the UK.
That’s an awful lot of people who do not fit the traditional profile of a standard single income – a lot of people with genuine affordability and resilience, that brokers say look good on paper, but who might end up being turned down by mainstream lenders that are overly strict with their affordability.
Brokers need lenders who can apply a bit of common sense to their products and underwriting decisions to help their FTB clients. Lenders need to go back to basics and treat borrowers as people, not just numbers.
Afin will consider these so-called “complex” incomes, whether a client is self-employed, working on a contract or has multiple incomes. For the self-employed, we will also consider forecasted income when it is supported by an accountant. We will even consider applications from workers at the very start of their contract if they have sufficient experience in that profession, whether it’s in the UK or overseas.
For qualified professionals with a strong income trajectory, Afin will consider a loan-to-income ratio of up to 6.5 times the applicant’s salary. For the growing number of professionals from overseas on a valid work visa, employed in vital sectors such as health and IT, we will also consider lending to them after only six months in this country, even if they don’t have a UK credit history.
On the thorny issue of deposits, all our mortgages are available up to 95% LTV, whether for first-time buyers or movers. Because we know that deposits can be tough to build up for even the best savers, Afin will also consider gifted funds towards a deposit from family members, including from family overseas, for our foreign national borrowers.
And it’s not just Afin that feels a change in approach to FTBs might be due. Last year, the FCA announced it is consulting on potential changes for first-time buyers and underserved consumers with the aim of “Simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life”, something we wholeheartedly support.
Ultimately, our proposition isn’t just about supporting first-time buyers and other underserved customers; our mission is to respond to the changing needs of all borrowers and the brokers who serve them, to help more people to get the home they want.
Rob Lankey is National Sales Director, Afin Bank
