Market insight: Enhancing mortgage options to match homeownership goals 

Becoming a homeowner should feel like an attainable goal, even if it takes more work to get there. 

For some, this might mean getting onto the property ladder slightly later in life, a trend which has seen the average age of a first-time buyer rise from 30 to 33 over a 20-year period. 

While this delay gives people more time to build up their deposit, which can take up to 15 years for some, house prices continue to rise and so does the deposit required.    

The home stretch 

Recent figures showed that first-time buyers paid £227,495 for their first home on average in June. This would demand a 10% deposit of nearly £23,000 and a loan of almost £205,000. 

Of course, this average takes into account the most affordable and most expensive regions. It also doesn’t consider that many first-time buyers, often in their 30s, leapfrog starter homes and go straight to larger, family-sized properties. Research suggests that 31% of first-time buyers already have dependants when they buy their first home. 

Rising house prices continue to add to the challenge, with Rightmove data showing average asking prices are nearing £400,000. Despite some recent softening in house prices, this suggests that property values are still generally trending upwards. 

Unsurprisingly, this means that as future buyers delay homeownership, they have more time to build their finances, improve their earnings over their career span and look for more ways to diversify their income. 

Supplementing and diversifying income 

It’s understandable that people are topping up their income, whether it’s to deal with the pressure on their finances or to reach their life goals – like homeownership – sooner. 

This trend is evident in the rising number of people supplementing their incomes with extra employment, and recent figures from the Office for National Statistics (ONS) showed that the number of workers with second jobs has reached a record high. 

The way people work is also changing. Many are now becoming their own bosses, with around 4.4 million self-employed people, making up around 13% of the workforce. 

There is also the potential for a shift towards more self-employment, as job vacancy data suggests a rise in opportunities for contractors over employed workers. This could be a consequence of the higher National Insurance contributions employers have to pay and the higher minimum wage, making it more cost-effective for businesses to hire people in this way. 

This indicates a significant cohort of people who need a lending community that understands their complex incomes and caters for that. 

Working with, not against, first-time buyers 

The changing financial circumstances of aspiring homeowners and their efforts to get onto the housing ladder must be recognised - and recently, the mortgage market made it clear that it is paying attention. 

The Building Societies Association, of which we're a member, has long called for a change in policy to support first-time buyers, particularly around the 15% cap on high loan-to-income lending. 

This year, regulators heard the calls of lenders and adjusted policy to allow a larger share of lending above the usual 4.5 times income. 

Lenders were invited to apply for permission to exceed the 15% cap, and we have been among the mutuals to embrace this change. 

This widening of policy is expected to help thousands of first-time buyers across the country.

Loan sizes range from £450,000 to £3.5m, and to accommodate people’s changing job and income profiles, we will consider borrowers with non-standard income, including restricted share units and self-invested personal pensions (SIPPs). 

The range is open to individual or joint borrowers earning at least £75,000 a year, and we also consider 100% of bonuses and commissions within this. Enhanced+ includes competitive fixed-rate options with 2 and 5 year terms. 

To navigate through some of the more complex cases, brokers also gain access to our dedicated team of underwriters so they can support brokers to help make borrowers’ homeownership dreams a reality. 

In recognition of people getting onto the housing ladder later in life, living longer and extending their mortgage terms, the range also works in combination with our recent decision to remove the maximum age limit for the repayment of standard capital and interest mortgages. 

Working together 

We're proud to join the lineup of lenders that have recently stepped up and taken on this policy change to improve prospects for first-time buyers. 

Market challenges will always remain, but as long as the mortgage market continues to listen to consumer needs and embrace intuition and innovation, the needs of hopeful homeowners can be met.