Certainly, there are many within the wider mortgage/agency/advisory community who probably wondered if we would ever see the likes of no-deposit mortgages again. I’m also pretty sure that the regulator is probably not too enamoured of their growth in numbers and I wonder how closely it will be keeping its eye on the lending levels that come with it.
First, of course, it’s important to point out that this is not a ‘straight’ 100% LTV mortgage because, as has been the case for some time with these type of products, there is a need for ‘Bank of Mum and Dad’ to step in and squirrel away 10% of the property’s value in a Barclays savings account. This guarantor’s deposit will sit there and hopefully will not be needed.
The other point to recognise is that Barclays are not first to market with such a product offering – at the last reckoning there are about half a dozen other lenders operating in this space, all with some sort of guarantor element with the product. Again, it’s worth reiterating that ‘Bank of Mum and Dad’ are not suddenly relieved of their responsibilities here although one presumes, all going well, they will get their savings back eventually rather than might be the case if they were to simply gift a deposit to their offspring.
So, why the major market chatter around the Barclays offering? Well, there are a number of reasons. Firstly, this is Barclays. This is not, and no disrespect here, a small building society or a challenger bank. This is a top six lender, a major player in the marketplace and one which could well be followed by others of its ilk.
Secondly, it being Barclays, it is making a major statement here. It’s suggesting that there is a place for no-deposit mortgages, that borrowers who take them out are worth the risk and can provide a fruitful product sector for them as a lender. In essence, it’s the first major lender not to treat 100% LTV mortgages as a product niche – it’s taking 100% mortgages back into the mainstream.
Thirdly, is the rate. Were it to come to market with a 100% mortgage with a 5% rate then there would be interest but everyone would (quite rightly) point out how expensive it was going to be for the borrower. They would probably be advised to continue saving their deposit until they could afford a cheaper 90/95% product. However, it’s come to market with a rate of 2.99% - incredibly competitive and once again it’s making the market listen.
So, what does this mean for the agency community? Well, for one it perhaps signals where lenders will be looking for their business during the rest of 2016. We’re all acutely aware of the pressures being placed on the buy-to-let market – both lenders and landlords – and therefore lenders who have been active here (like Barclays) may well be looking for other product areas, such as mainstream ones like first-time buyers, to secure greater levels of business. The problem of course is that buy-to-let lending tends to be more profitable with a greater margin, so where in the mainstream market can lenders achieve similar levels of lending. You’ve, guessed it – high-LTV lending, in this case going up to (what we presume) is the maximum.
The Government has made no bones about the fact it wants to ‘level the playing field’ between landlords and first-timers and it has put a number of measures in place to do this. Lenders are clearly taking the hint and following its lead and, while it may not be a flood that follow Barclays into this space, you have to think that more will look to pursue this customer segment with more competitive offerings.
So, for agents, this may well be the time to show the value of your offering to your existing and potential first-time buyer clients. Many, over the past couple of years, could well have been put off by the highly competitive market they have encountered – especially with the strength of landlords’ ability to buy – but now the tables could be turning in their favour. A marketing campaign around this and a deliberate targeting of first-timers could well bring dividends – perhaps it’s time as an agency that you make the first-time buyer feel loved again.
