At the time of writing, the US Federal Reserve had just kept its key rate at a two-decade high of roughly 5.3%. Jerome Powell reiterated that the US central bank doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing sustainably to its 2% target. In truth, it’s what every central bank knows and must get across to the public, many of whom are awaiting cuts and a return to the ‘old days’ of historic interest rate lows.

Inflation remains stubbornly high, and closer to home, house prices in the UK continue to defy the naysayers and doom-mongers. The lack of supply of the right kind of property supports the prices on the limited stock available to buyers.

While home buyers have returned to the market their profile has changed which in part reflects the increased lack of affordability. Becoming a first-time buyer is the most expensive it has been for over 70 years, according to a one recent report by the Building Societies Association. [1]Successful first-time buyers increasingly require additional financial support from parents in addition to two higher-than-average incomes. Those not so lucky are abandoned in the rented sector.

The signs of affordability strain and pain are plain to see. According to analysis using product sales data from the Financial Conduct Authority, the number of first-time homeowners over the age of 50 has grown by nearly a third over the past five years. [2]

But while the age of first-time borrowers is arguably increasing so too are mortgage terms. Living and working longer is changing the shape of the housing market and the borrowing needs of those in it. UK Finance revealed a rise in first-time buyers selecting longer mortgage terms in their recent UK Finance Household Review which showed a fifth of first-time buyers had a mortgage term of more than 35 years in 2023, up from a tenth in 2022[3]. 

Brokers and lenders can get a very accurate and immediate sense of how people are faring across the nation by conducting affordability assessments, assisting clients in making the best possible presentations of their income and creditworthiness. We have all seen how hard the continued rise in bills has been for many borrowers. The likelihood is this will continue but amidst all that the market needs to evolve to meet this changing need.

We’ve increased our maximum age at the end of mortgage term to 80 years old and will consider lending to an applicant’s 80th birthday based on their current income, where the applicant is under 50 years old, they are at least 10 years from retirement, and they are actively contributing to a pension scheme. Additional applicants outside of this can be considered too and we have extended the maximum potential mortgage term from 40 years to 45 years.

The economic, technological, and social changes we see today change people, their priorities and behaviours. Lenders need to adapt their products to meet these too.

https://www.bsa.org.uk/information/publications/research-and-reports/first-time-buyers

https://www.ftadviser.com/mortgages/2024/02/05/number-of-first-time-buyers-over-50-increases-by-30/

https://www.ukfinance.org.uk/data-and-research/data/household-finance-review