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Lenders must ditch ‘computer says no’ approach or average FTB age will hit 40 by 2020

Lenders must abandon their ‘computer says no’ approach to mortgages if we are to prevent the average age of the first-time buyer hitting 40 by the end of the decade.

James Bawa MS blog

The average age of the first-time buyer is relentlessly on the rise, racing from 28 in the 1990s to 35 today, according to a survey by Post Office Mortgages in September 2012.

Hardly surprising, given the changes in availability of mortgages and the need to provide a larger deposit that are currently huge barriers to many aspiring home owners.

In truth, there are many factors that contribute to the largely stagnant property market that has become the norm since the credit crunch first bit some five years ago.

A quick look at house prices vs average salaries paints a telling picture.

In 2001 the average cost of a house was just under £122,000 with the average salary £16,500.

Today the average house price is £236,500 an increase of 94 per cent on 2001, and the average salary is £21,300, an increase of increase of just 29 per cent.

Add to that tough scenario the fact that the average 75 per cent LTV mortgage requires a deposit of £59,000, almost three years worth of an average salary and it’s clear to see why house purchase remains a remote dream for many.

Meanwhile the cost of living is also a real issue as it’s now five times higher than the average wage increase, according to Office for National Statistics Consumer Price Indices, April 2012. This year, the average family will need to earn an extra £1,000 to maintain the standard of living they enjoyed in 2011.

So, what can be done to help first-time buyers and to get the property market moving again? Well, we believe both lenders and the Government can make a significant impact here.

Affordability has to become the way lenders assess mortgage applicants.

We are now in an age when many would-be home buyers could afford monthly mortgage payments but don’t have any savings, so we all have to work harder to help these people, whether they have a deposit of 5 per cent, 10 per cent or no deposit at all.

At Teachers, we work on assessing applicants individually. A computerised approach is simply not practical with so many factors to consider when underwriting a mortgage application.

We are certainly helped by having a largely niche customer base. We understand teachers and know how their salary scales and career progression works, so we are able to offer a degree of flexibility.

There has been a significant number of initiatives launched to help address this issue from government and develop backed schemes, such as FirstBuy, to local authority indemnity backed schemes such as Local Authority Mortgage Scheme which as of November this year thirty-three councils had helped to generate nearly £100m in mortgage lending. We have been happy to support both of these schemes.

If FirstBuy and LAMS were just the beginning of a raft of initiatives to support first-time buyers, we may be able to stop this hard-pressed group pushing ever further into middle age.


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  • Chris Gardner 14th December 2012 at 2:52 pm

    Im all right jack | 14 Dec 2012 9:34 am

    As most BDMs will tell you – their own branch networks are rubbish at righting business directly.

    It seems to me that with most lenders they have struggled terribly to get direct volumes up unless they are prepared to go down the route of doing deals that consumers are prepared accept bad service and delays (HSBC) for, yet at the same they seem to be happy to sideline brokers where they can – dual pricing, fobbing off more and more admin etc. The way its going now the broker will get blamed if a punter misses a payment!!

    Sense needs to prevail with lending decisions instead of “computer says no” as we appear to have today.

  • Im all right jack 14th December 2012 at 9:34 am

    Sure mortgage in branch is a good idea Chris – no more brokers needed!!!

  • Chris Gardner 13th December 2012 at 5:20 pm

    Doctor SP | 11 Dec 2012 12:58 pm

    Maybe they could underwrite them in-branch by people who know the names and backgrounds of applicants families and make sensible lending decisions based on human judgement. Algorythmic lending, afterall, has been proved to be a disaster has it not?

  • Doctor SP 11th December 2012 at 12:58 pm

    Of course, it’s easy to have a manual, case-by-case underwriting system when you do the kind of business volumes that teachers do.

    And I’m sure if the big lenders adopted it with their volumes then none of you would be moaning when it took four weeks to get a case underwritten?

    Brokers are renowned for their patience after all…

  • ADD 11th December 2012 at 11:47 am

    Many wise words said from a number of people, but I am a little uncomfortabale with any call to return to the good old days.
    Mainly because I cannot be sure what the good old days look like.Is it 2001 that John Lacy quotes when everything looked affordable. Was it 2006 when a dead donkey with an address label on its collar could borrow anything required, or was it in 1970 when my father had to humble himself and beg in front of an overbearingly smug Building Society Manager.
    Looking back too much can distort the present. Deal with today, and it will need change from all including lenders, customers, brokers and builders in order to re-balance the industry. Can’t see it being pretty or quick personally. But the market always wins out in the end, after all the special schemes, subsidies, and political meddling have disappeared.

  • Roger Snodin 10th December 2012 at 5:32 pm

    I agree entirely with John lacy’s comments and do not think they are patronising at all, just the truth.

    Recently I read a sob story in The Mail where a young couple had given up their rented flat to live in with parents as this was the only way they could save. Oh, by the way, they had just returned from a 2 week holiday in California!!!

    I arranged a mortgage for a 21 year old who boasted that he was the only person among his 70 or so friends who had been able to save a deposit. He admitted the reason for this was because he had been banned from driving and so there was less opportunity to waste money.

  • John Lacy 10th December 2012 at 4:34 pm

    OK Anonymous—has it ever occurred to you that the ones you mentioned are mainly the ones who shouldn’t be buying anyway as they either don’t have the earnings capability or the continuity of employment to be there safely. The other comments I stand by 100% as I see them on a regular basis with a lack of priorities and an infinite ability to spend their money on rubbish.
    I might treat you a little more sympathetically if you had the guts to put your name on your post

  • Kylee Sims 10th December 2012 at 4:21 pm

    What a patronising comment. “If first time buyers want to buy a house perhaps they’ll have to give up the regular new cars and the 2 or 3 holidays a year” Lots of people do not have a new car or a regular holiday and still cannot afford to save enough for a deposit. Loss of jobs 3/4 years ago when the recession started and people struggled with loan/credit card repayments have given people blemishes on their credit files that despite having been repaid are still causing them trouble getting mortgages now. You do need to make some tough choices but fact is, people do not have enough money to live-let alone save thousands of pounds!

  • John Lacy 10th December 2012 at 2:52 pm

    As far as it goes in this article Mr Bawa is correct BUT and it is a huge but purchasers have to realise (as their grand parents did but not usually their parents)that they have to make an increased effort to get what they want.
    If first time buyers want to buy a house perhaps they’ll have to give up the regular new cars and the 2 or 3 holidays a year (yes Mr Bawa I’ve aimed that comment specifically at the teachers) and knuckle down and make the effort to adjust their spending.
    They will also have to take more care of their credit record as even 1 late payment is going to cause them a problem.
    To paraphrase the words of the style magazine idiots idiots no you can’t have it all–you’ll have to make some tough choices.