As first-time buyers struggle to get onto the property ladder, perhaps like never before, Skipton Building Society is focussed on doing what it can to help them achieve their goal
The following article is written in association with Skipton Building Society
“It is certainly challenging for first-time buyers now,” acknowledged Jennifer Lloyd, Head of Mortgage Products at Skipton Building Society. “If it’s not the most challenging time, it's got to be up there, in terms of the number of different pressures that first-time buyers are facing. The cost-of-living crisis isn't abating, inflation is still very high and that's obviously reflected in the struggle of first-time buyers who are trying to afford to live and finding it very difficult to save a deposit.
“Even when they have managed that, they've got to get over the hurdle of being accepted for a mortgage and then actually pay for it on a month-by-month basis. With rates at the level that they are, as a proportion of your take home pay, the average house in England and Wales is over 8 times the average income,.”
She added: “House prices are softening slightly this year, as many forecasters predicted they would. But overall, they’re still elevated, compared to pre-pandemic levels.”
Dating back to 1853, Skipton’s business model remains remarkably unchanged from the principles on which it was founded - to bring people together to help others, including offering the support they might need to purchase their own homes. A mutual organisation, without shareholders, the North Yorkshire-based lender, which counts Connells estate agents among its Group, exists for its one million-plus membership of savers and borrowers, many of whom are first-time buyers.
As Lloyd reflected on the circumstances experienced by those seeking to become homeowners, she clearly understood their predicament. It is little over a decade since she bought her first property with her husband – a small rural cottage. She recalled the excitement of that momentous purchase, but also how hard it was to achieve.
“I moved back in with my Mum after being in rental accommodation for three years, so that I could save some money to get onto the property ladder,” Lloyd shared. “It took several years to save the deposit, and then we had help from family as well, a few thousand pounds. I'm very grateful that we did.
“Not everybody has that as an option so, from my point of view, it's thinking about how Skipton supports those people who don't have the option to stay living at home with Mum and Dad or financial help from a relative. What more can we do to help people who haven't got access to that?”
One of Skipton’s recent innovations that aims to do just that is their Track Record Mortgage, a product that was launched to huge media attention earlier this year, even making headlines in the United States. It enables eligible renters, aged 21 and above, to obtain a mortgage, fee-free, to buy their first property, without a deposit or guarantors.
Tenants who haven’t owned a property in the last 3 years and can prove affordability and can evidence at least 12 months of rental payments, can borrow up to 100% of the property’s value, with Skipton’s five-year, fixed rate mortgage. It ensures that the monthly mortgage payment for each applicant is not more than the average of their last six months’ rental costs. Such is the engagement with the product that the building society is appraising feedback from brokers and customers and considering how to evolve the product to potentially make it more accessible to even more customers.
“It was devised very much in recognition of the many, many people who are living in rented accommodation,” Lloyd said, “working really hard, paying their rent every month on time, paying all their utility bills and running a household, but unable to also save up thousands of pounds for a deposit.
“Our view was, if you've got that track record and you can demonstrate that you've been running your household well for at least a year, then you should be able to own your own home, and we would like to help that happen.”
She noted: “There have been really nice case studies coming back from it. People who were facing elevated rents or uncertainty because their landlords were selling up have been accepted for a Track Record mortgage and are buying their own home. For some, their monthly mortgage payments will actually be lower than their rent would have been, which is an amazing result.
“We had lots of brokers asking us, why is the product limited to First Time Buyers, when saving for a deposit is a struggle for many. So from this feedback we have opened up our lending criteria to include customers which haven’t owned a property in the last 3 years. We're very proud of Track Record and our team is constantly working on developing and bringing to market unique and appealing, targeted product propositions.”
Lloyd points to other Skipton initiatives which ease the burden faced by first-time buyers, including high loan to value lending, for example 95% LTV on new build properties, and its support for government schemes such as Shared Ownership.
It also offers Joint Borrower Sole Proprietor, a mortgage where the buyer can add family members’ or friends’ income onto their application to help increase their affordability, without those who support them parting with any money. “We want to do more to promote that, because not everybody knows that is part of our proposition,” she reasoned.
Skipton’s relationship with brokers is key, Lloyd explained, and could be instrumental in smoothing the house purchase process for first-time buyers.
“We are a heavily intermediary-led lender,” she declared. “We work in collaboration with our brokers and appreciate all the support they do give to us. It helps us to deliver on our purpose. We've got a really great team of BDMs and we are nimble as an organisation, with that purpose-driven mission at our heart, so we want to hear from them. If there are things about our proposition and our product range which could be different, let us know and we will look at it.
“I think a big challenge for the industry is once you've got your offer, what happens next? The time from having a mortgage offer to completion and getting the keys to your new house can, on average, be four months. We know from our research, time and time again, that your average first-time buyer doesn't know about what a loan to value is, doesn’t understand what a conveyancer does or understand what an early repayment charge is. It can be really overwhelming and confusing.”
She affirmed: “I think that we can do something about that, because we have a unique access to the entire value chain at Skipton Group. We aim to speed up that turn-around time, keeping people informed and engaged and understanding what's happening. It’s a big opportunity in the market right now.”
Lloyd is still living in the first house that she bought, albeit with a few renovations, which have helped the property accommodate her growing family.
“It's been wonderful being able to do that and to have that security,” she enthused. “I know that's what a lot of first-time buyers aspire to have, a place to call their own, so, helping as many of those people as possible is what gets me out of bed in the morning.”
For all the turbulence in the economy currently, the first-time buyer market would prove resilient, Lloyd believed.
“People are always going to want to own their own homes, so it will still play a big part in the industry,” she considered. “First-time buyers are still there, wanting to take that first step onto the ladder, perhaps more so than ever, to own their own home. They are prepared to apply that discipline, to try as hard as possible to do everything they can to make it a reality.”
Lloyd concluded: “Certainly, from Skipton’s perspective, it is our focus and a priority to help more people to get onto the property ladder and we'll continue to do that.”