FTB figures show remarkable resilience

6 February 2012 | By Nigel Stockton, financial services director at Countrywide

We should not underestimate the significance of this development. The decision is great news for first-time buyers and it will give hope to home movers previously unable to access mortgage funding for new-build houses.

We’re working with more than 390 developers and house builders across the UK and believe that new-build holds the key to kick-starting the market.

We expect this sector to grow more quickly than the rest of the market and are investing and developing our capability in this area.

Post-credit crunch, risk-averse lenders have lacked innovation in this field, despite widespread calls for a review of the way new-build properties are valued and their products priced.

Halifax is now bucking the trend by working with a selection of developers and brokers to try something new and I sincerely hope more lenders follow suit.

In other headlines, I saw that the Centre for Economics and Business Research has claimed the UK is already in recession, which managed to knock any post-new year cheer out of me.

It has also predicted a 15% increase in house prices by 2016, which seems unlikely if we’re in the grips of a recession right now. Am I the only person starting to question the validity of such forecasts?

For example, the bearish forecasts issued by Capital Economics between 2002 and 2006 probably cost investors an absolute fortune and having just reviewed its latest forecast, I’m concerned that its managing director Roger Bootle might be off the mark for 2012.

I wonder if it might be worth me taking a step back in time and look at what our leading forecasters have predicted against what actually happened.

On the mortgage front, we’ve seen some interesting stuff from the Council of Mortgage Lenders on the first-time buyer market. Its findings reveal how resilient the first-time buyer market has been in recent months, with 17,300 first-time buyer loans worth £2.1bn advanced in November, up 4% by volume and 5% by value compared with both October 2011 and November 2010.

In comparison, home mover loans increased by 5% in volume and 4% in value from October and by 2% in volume and value from a year ago.
While the number of first-time buyers, and indeed all buyers, has declined markedly since the credit crunch, the proportion of loans advanced to first-time buyers has remained remarkably steady, fluctuating between 34% and 40% since 2005.

In November, first-time buyers took up 37% of the house purchase market, the same as in October.

The CML findings provide a fascinating insight to the housing market and while the overall outlook for 2012 is flat, the report shows how first-time buyers will always take 35% of the purchase monies lent in any market.

These figures are all the more remarkable when considering that first-time buyers need to stump up an average deposit of 20%.

The most important statistic we have heard from the CML is that affordability is at its best for eight years.

You can see why the overall market is at a stalemate - it’s the deposit hurdle. While there are schemes such as the government’s FirstBuy and a plethora of new-build offerings through builders and developers, more needs to be done to battle the deposit issue facing first-time buyers.

No doubt designed to boost our spirits on improved product availability, a report from Moneyfacts.co.uk in January also revealed that we have just 49 products at 95% LTV.

Until 95% LTV lending is more readily available - in whatever guise, be it shared ownership, equity release or assisted deposit - we aren’t going to see any sustained and significant movement in the market.

We’ve got the mortgage indemnity guarantee scheme of course, which is representative of about 20% of the market. I’ve made my views known on the March implementation date so we’ll have to see what happens there.

I’ve heard a sweepstake is now underway to see how long it will be until the government pushes back the implementation dates.

Of course what’s most likely to happen is that we will have a handcrafted application process, which enables the scheme to launch without making everyone look daft.

Another story that grabbed my attention at the beginning of December in the pages of Mortgage Strategy came via my friends and colleagues at the Financial Services Authority, who claimed that up to 8% of mortgages are subject to forbearance.

That seems far too high and I’d like to see the source of the figures. When I was in Lloyds Banking Group - a long time ago now - it was considered a disaster if the number reached 3%.

Equally, I can believe that some old packager and specialist lender books are subject to way more than this from a percentage point of view.

But for the whole market to be at 8% the likes of Santander, Nationwide and Lloyds Banking Group would all need to be at or close to that number. So I’d like to see proof and more data on this.

Finally, a good luck to Coreco Group director Andrew Montlake taking over big clogs from Jonathan Cornell for the weekly Marketwatch column. I was encouraged to see that he is busy tweeting and doing the column as it means he won’t be writing business at Coreco. Best of luck to him but also and especially to Cornell who I hope quickly gets to be as senior in the regulator as he deserves.

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