First-time buyers (FTBs) are getting older, with the average age now 34 and some people being in their fifties when they get on the housing ladder.
The number of FTBs is also declining as it becomes ever harder to raise a deposit. Yorkshire Building Society reports that, in 2023, the number of new FTBs with a mortgage fell to the lowest level in a decade.
The worry is that many people think mortgages are inaccessible. Some believe that lenders, rather than actively wanting to lend to them, will do everything to avoid it. Many feel it’s an ‘us versus them’ scenario.
Many people think mortgages are inaccessible
There is therefore a desperate requirement for more education as even people going through the housebuying process often don’t understand it.
We clearly need more financial education in schools, but this is not a short-term fix and we cannot wait for the education system to catch up. Instead, we need to be the educators and use technology to help us.
There is a role for tech to give potential FTBs more of an insight on the requirements that will be asked of them in a way that is positive and constructive — everything from how to save for a deposit to what a mortgage is and how it will work.
Social media
We know that attention spans are getting shorter and that many younger people, instead of getting their information from official sources such as banks and mortgage brokers, instead turn to the likes of TikTok and other social media.
Communication is key, and we need to get the mainstream media on board
Currently, information through social media may be inaccurate or misleading, so we have a responsibility to even the balance. There is no point avoiding these communication methods, however; that genie is out of the bottle. Instead we need to embrace it and go to where the audience is, to address their hopes, fears and any misinformation while providing education.
Another source FTBs turn to is ChatGPT. This can play a role but only scrapes the internet and is neither qualified nor regulated to help someone, so cannot provide a replacement for any proper form of advice. It also can’t deal with a person’s individual circumstances.
Tech alone, therefore, cannot do what is required. Personal advice from brokers is still needed. So, as an industry, we need to combine tech and people to make a better, more tailored experience. There is a lot of opportunity but there needs to be more education so that people who turn to tech for advice understand its limitations. And we need to start this education even before someone begins to apply for a mortgage.
We need to demonstrate the benefits, including time savings and particularly the security, around Open Banking
One area is teaching people how to recognise essential spending versus their discretionary spending, with tips on how to better manage their finances while saving for a deposit.
Another is by publishing informative content on the importance of a credit score. Many potential FTBs don’t understand what goes into establishing this. While most recognise that they need to save, some don’t realise they need to have had some form of credit for at least six months to build up a credit record.
We need more transparency on Open Banking and its value. Some consumers, and even brokers, fear it, which can mean clients are dissuaded from using it.
The biggest worry seems to be that an organisation with access to a client’s details through Open Banking will be able to see far too much. Actually, most lenders use Open Banking in a more macro way for assessing the credit worthiness of a borrower or ID verification.
But access to more data can mean a more tailored experience. So we need to demonstrate the benefits, including time savings and particularly the security, around Open Banking.
Some believe that lenders, rather than actively wanting to lend to them, will do everything to avoid it
Undoubtedly, as a community, we need to make information around mortgages more accessible, and use tech to do so. Tech is fundamentally an enablement tool, but we all need to come together to make it easier to use, particularly for FTBs.
Communication is key, and we need to get the mainstream media on board. So let’s put ourselves in the client’s shoes and understand their fears. Let’s go to where they are mentally and where they hang out digitally to take them on the journey with us.
Let’s help them to embrace the possibilities of how much easier developments such as Open Banking will make their lives, including speeding up the mortgage application process.
Peter O’Connor is chief executive of Target Group
This article featured in the July/August 2024 edition of Mortgage Strategy.
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