The Budget gave no further help for people trying to buy their first home, not that it’s necessarily the Government’s job to do this, but given a lot of pre-announcement gossip, the fact there was nothing, did come as something of a surprise.
Set this in the context of the last couple of weeks however, and specifically lender activity, and it’s possible to see a clear push forward in terms of trying to secure first-time buyer business both now and into 2026.
HSBC has cut rates and boosted cashback for new buyers. Lending to new buyers has risen after the shift in loan to income rules. Accord has dropped its minimum income bar for loans above 4.5 times income. These moves are not small. They show intent.
There is a sense that the next year will be a tough fight between the biggest names in lending, and between those lenders and advisers. The tools now at lender’s disposal mean they can lend more at higher income stretch, as long as they stay inside the broad rules. When the limits move, lenders tend to move fast. They have done so here.
One point of interest is the stock of 95% LTV deals. These have not shot up in number, and we saw a dip in the autumn. Since then the count has stayed about the same. On one hand this feels at odds with the wider push. On the other, it shows lenders were, like most stakeholders, being somewhat cautious pre-Budget, although now those ‘shackles’ appear to be off.
The biggest lender, Lloyds Banking Group, has made clear that new buyers will be an area of focus. When the biggest lender signals something, the rest watch and often follow. It is fair to say the signs point to a market where lenders are going to be trying to win ground early in the year, potentially at the expense of advisers.
That’s because there is a lot more talk about the use of direct channels. Some see this as a key part of lenders’ push. The thinking is easy to follow. A new buyer found through a direct route might stay with the lender for years, effectively costing the bare minimum to secure.
In the advisory space, there is a distribution cost of course. However, if the lender can then steer the client towards a direct route next time, the long-term gain could be large. This is not new, but the talk around it feels louder.
The main reason is simple - over 90% of new mortgages come through advisers. Some inside lenders might well think this share is too high and gives advisers too much control over the flow of new business. At the same time, the rules on how lenders can speak to their borrowers has shifted. The removal of the advice interaction trigger being a huge change. There is now room for lenders to deal with existing clients without raising the flag of advice.
What do we make of this? Certainly, you have to weigh up the value and the comfort of advice. There’s a number of very good reasons why borrowers go through advisers. Particularly first-time buyers. They can have more questions than any other type of client. They do not know the full range of products, terms or risks. They want the security and the certainty that they are accessing all options in the market, not just those offered by one lender.
Advisers fill that need. They explain the limits on income stretch, the costs of owning a home, the rules on cashback, the impact of fees, the wide array of schemes/options available, and the risks of long fixed terms.
A further point is this. Some lenders do not sell direct. They purely source business via advisers and build their plans around them. If advisers feel that some banks or building societies are trying to cut them out, they may choose to place cases with those who are adviser-only. That change in flow could be sharp. It might also cause the lenders who push hardest on direct routes to miss out on the clients who value advice the most.
This is why the relationship between lenders, advisers and new buyers feels set for a spiky year. The calls for mandatory advice for first-time buyers are growing. If that takes hold in policy, however unlikely that might seem at present, it would cut off the direct route as an option. Even if it does not, advisers will – and should - push hard to show the value they bring.
Next year looks likely to bring more change in products and rules. A rise in the number of deals seems likely. There should also be more room in criteria. If the Government comes close to its targets for new homes, those homes need buyers. New buyers tend to like new homes. If they get the loans they need, builders will feel the benefit. Lenders know this.
The lack of clear help for new buyers in the Budget only brings more weight to the plans of lenders. They are the ones now shaping the market. They do this through rates, cashback, income stretch, relaxed income bars, and smarter ways to hold on to clients.
Advisers will need to keep a close eye on these moves. They will also need to show the clear value they bring at the point of buying a first home. Lenders will certainly be shouting loud to get their direct offerings heard. It promises to be quite the battle.
