No sector of the housing market has felt the effect of steadily increasing property prices more than first-time buyers.
Although the rate of increase in many areas seems to have levelled off – recent surveys even report a fall of between 1% and 2% – the rise in property prices over the past couple of years presents a major challenge to first-time buyers.
National figures show that the average mortgage being sought by first-time buyers is around £102,000 and while low mortgage rates have eased the financial burden, earnings have not kept pace with the rise in property values. For anyone seeking to raise a deposit the affordability gap is being stretched to the limit.
Admittedly, property prices in The Hanley's Staffordshire heartland have not reached the heights seen in regions such as the South-East but equally average earnings in cheaper areas such as ours are below national levels too, so first timers have little more buying power than anywhere else. New buyers are the lifeblood of the property market and as much as possible must be done to assist them. Our range of products, including discount and fixed rate deals, has much to offer the newcomer seeking to keep payments as low as possible in the early years of homeownership.
However, considering the borrowing ability of any customer has to be done in the context of realism and financial prudence. As a mutual and independent society we are committed to providing the right products for our customers – and that includes a mortgage they can afford. Handing first-time buyers the keys to their dream house via a mortgage that stretches their finances beyond realistic limits does neither the borrower nor the lender any favours.
We treat every customer as an individual and with first-timers in particular we take care not only to offer the right product but also to advise on the financial realities of homeownership. There are many costs that can be overlooked in the excitement of finding a home that can make a serious dent in personal budgets. Many years of experience in the local housing market not only allows us to provide professional guidance to new buyers but also means that they are always treated fairly and given clear advice.
New buyers are looking at various ways to meet the affordability challenge including young professionals buying as a group or parents taking an equity stake in their children's property. But nearly all first-timers need to find a meaningful deposit and that means growth in the other side of a building society's business, savings. It's a trend that underlines our traditional role, linking the savings ethic with providing the funds for homebuying.
Putting aside sufficient funds for a deposit is a priority and The Hanley moved to help first-time buyers with the launch of its Double Your Money offer. Under this plan, a first-time buyer who invests up to £50 a month for six months into our regular savers account receives an equivalent cashback when they complete a mortgage with the society. The product has been running for a year and is proving effective in helping first-timers fund deposits.
We are also assisting first-time buyers through our community strategy. We work with local housing associations to bring forward the development of affordable properties that are particularly appropriate as first homes. We will soon publish the first edition of our homebuyers' guide, providing help on all aspects of buying a home, choosing a solicitor and estate agent and explaining the types of mortgage available.
The Hanley believes that increasing income multiples and LTV rates are not necessarily the most appropriate ways to help first-time buyers. Treating every customer as an individual, encouraging saving and providing the right advice will provide a firm basis for a successful homebuying relationship.
These are the ethics mutual building societies were founded on and should not be overlooked in a bid to gain market share and increase income.
Buying a home remains one of the largest financial commitments that can be entered into and without professional and honest guidance both before and after Financial Services Authority regulation, the future for first-time homebuyers will remain challenging.