Mortgage lenders must assess their operational capabilities before committing to the Government’s new Your First Home scheme, Target Group has warned, urging lenders to ensure they are ready to respond to increased lending demand without putting pressure on their wider operations.
Your First Home will allow eligible first-time buyers to purchase a new-build property with a deposit of just 2.5%, supported by a Government-backed equity loan of 20%. New details, revealed as part of this week’s Budget, confirmed that the scheme will open for pre-registration by the end of December, with full applications from February next year and the first loans issued from April 2027.
It will feature household income caps of £110,000 outside London and £140,000 within the capital, while property price limits will also be place based on local authority median prices, with inner and outer London caps of £650,000 and £500,000 respectively. Furthermore, the interest-free period on the equity loan will be set at five years.
The scheme, which has similarities to the previous Help to Buy scheme, could create a valuable opportunity for participating lenders to reach more first-time buyers and expand their presence in the new-build market.
However, Target Group believes lenders should be looking beyond the potential increase in business and considering whether their existing infrastructure is ready and able to support it.
The leading outsourcer and technology provider argues that an increase in lending volumes brings demands across the entire mortgage lifecycle. From application processing and underwriting, through to account onboarding, payments, customer administration and ongoing servicing, lenders need to ensure they have the technology, skilled people and operational capacity to maintain an effective service.
Melanie Spencer, growth director at Target Group said: “Your First Home presents an exciting opportunity for the mortgage market, for developers and for housing supply for more broadly. However, lenders looking to take part in the scheme need to make sure their operations are ready to support it. The last thing lenders need is an increase in applications to become a challenge for the wider business because the systems, processes or resources aren’t in place to accommodate the additional demand.
“That means taking a hard look at existing technology, operational processes and workforce capacity. Can systems handle additional volumes without creating bottlenecks? Are there enough people with the right expertise to manage applications and customer queries? And importantly, can the business maintain the same levels of service for existing customers while bringing new borrowers on board?
“These are the questions lenders should be asking right now if they’re considering throwing their hat in the ring to offer Your First Home. Digital transformation, tech upgrades, recruitment and training can all take time and resources, so identifying potential gaps in operational capability ahead of increased demand is essential.”
Rather than committing significant time and investment to expanding in-house infrastructure, Target argues that outsourcing some or all of their lending operations could offer a more flexible and efficient way to access the technology, expertise and resources required. This could include origination, managing applications, in-life servicing, payments, administration and collections.
Melanie adds: “Not every lender will have the appetite, resources or technology to build additional capacity in-house, and nor should they necessarily need to. The important thing is recognising where the gaps are and having a plan to address them. Working with an experienced, FCA-regulated provider means access to established technology, skilled people and proven processes, helping them respond to changing demand while focusing on the important work of meeting the needs of the market, driving innovation in their products and criteria, and delivering a positive customer experience.
“In truth, the opportunity is bigger than Your First Home. It’s make sure lenders have an operation that can support sustainable growth, deliver good customer outcomes and adapt as the market continues to evolve. Lenders taking that time to assess their capabilities now will be a much stronger position to respond to the market as it continues to evolve.”
