How Aldermore could help first-time buyers achieve homeownership goals


Jon Cooper, our head of distribution in Retail Mortgages takes a look at how lenders across the financial services industry could support the growing and diverse needs of first-time buyers in today’s high-priced housing market.

Over a year on from the outbreak of the pandemic, we’re seeing the UK housing market show encouraging signs of revival. House prices grew £7,000 on average in April buoyed by pent up demand, the Stamp Duty holiday, and the re-emergence of lower deposit mortgages.

Rises in house prices can often act as an indicator for the health of the wider economy, so this is a positive sign for the UK recovery coming out of the pandemic. However, we need to ensure that the resurgence of the housing market doesn’t leave anyone behind.

First-time buyers struggling to secure a mortgage 

While stamp duty relief and increased product choice boost new buyers’ prospects, many are seeing other challenges emerge that are acting as barriers.

Research from our First-Time Buyer Index found that just one in five were able to get a mortgage on the first attempt, a huge decline from nearly half pre-Covid-19. The most common reason for rejection was poor credit history.

Over a quarter of prospective first-time buyers are now worried about their credit score, and the main barrier cited to getting on the housing ladder was affordability, so this is a clear and growing concern.

This generation of first-time buyers are far more diverse than previous ones. They are coming into buying with a wider range of incomes, financial backgrounds, and credit histories. This is compounded by the process becoming more confusing to navigate, with a greater complexity in the choice of support available to first time buyers. From help to buy, shared ownership, to the First Homes Scheme, private sector equity share schemes and joint borrower / sole proprietor, all reinforcing that it can be difficult to find the mortgage that best suits individual circumstances.

Taking active steps to improve credit scores

Being declined for a mortgage, even though it can be a deflating experience, is not game over as there are still options and opportunities available.

The growth of specialist lenders the past decade, that through human underwriting can dig into the detail of more complicated applications, have opened the door for those with complicated income streams or credit issues in their past. Specialist lenders may prove more vital going forward in helping new buyers find a pathway to home ownership.

Our research found that many first-time buyers are also taking it upon themselves to improve their chances, with over a third (39%) now actively looking to improve their credit score. The simple steps of registering on the electoral roll, ensuring student debts are paid, making regular payments on time, and keeping credit usage at a reasonable level will all increase chances of being accepted. This can go a long way to reassure lenders that a new buyer is capable of meeting payments on time.

The growing role of the broker

But the biggest assistance to first-time buyers as we move towards a post-Covid-19 environment appears to be to seek out a broker. Nearly 50% of prospective first-time buyers have done so, up sharply from just 18% pre-Covid-19. With 98% saying the broker was useful, in particular for checking affordability, providing useful recommendations and checking paperwork.

The more complex financial situation of new buyers and the increasingly confusing and complex set of mortgage choices reinforce the use of a broker is more vital than ever.  What first-time buyers need now is support to ensure they can realise their home owning dreams, so the sector needs to make sure it is focusing on how it can accommodate their increasingly diverse circumstances going forward to ensure the housing market is working for everyone.

Jon Cooper, head of mortgage distribution at Aldermore.


10 great reasons why prospective mortgage customers should use a broker. - Share this article with prospective mortgage clients to help them to see the benefits a broker could offer.