# Mortgage Solutions podcast Episode 1

https://www.youtube.com/watch?v=AbMTP-MmO7g

[00:15] Hello and welcome to this Family Building Society podcast where we'll be taking a closer look at mortgage affordability, the role of the Bank of Mom and Dad, the impact on their financial resilience, and what more could be done to support families.
[00:29] I'm Samantha Partington, freelance journalist for Mortgage Solutions.
[00:33] And today I'm joined by two of Family Building Society's mortgage experts and business development managers, Neil Kadala and Arif Car.
[00:42] So at the start of the year, Moneyfax brought out data saying mortgage affordability had gone back to levels seen in 2023.
[00:47] But four months on and UK Finance has released its statistics showing that in some parts of the UK, particularly East Anglia and the London commuter belt, affordability is the worst it's been in 18 years.
[01:00] So I wanted to ask you both what your take on mortgage affordability is at the moment.
[01:06] And Arif, perhaps if I could start with you.
[01:08] Yeah, sure.
[01:09] Uh Sam, thanks for having us.
[01:10] Thanks for hosting.
[01:11] Um so I would probably echo both uh both uh.
[01:15] Publications from both of those companies because we did start the year, especially the first couple months, where it was quite steady.
[01:22] We had steady rates.
[01:25] The thought process within the market was, I feel, we're going to get a couple of base rate cuts.
[01:28] Affordability was comfortable.
[01:33] Inflation, you know, wasn't where we wanted to be, but it was settled.
[01:38] So, inflation and estate reflect affordability.
[01:42] Those all those outsources are faced into the affordability calculators of all lenders.
[01:45] So it was good.
[01:50] You know, salaries were where they were.
[01:52] So we were getting used to it.
[01:53] It was fine.
[01:53] Then obviously, you know, hell let loose towards end of March.
[01:59] Quite a few lenders pulled their rates.
[02:01] Affordability came a bit more stringent, which naturally had an impact on affordability and mortgage calculations and how much we could lend to clients.
[02:10] It feels like and it seems like the confidence is coming back.
[02:14] Lenders are becoming more comfortable.
[02:16] And more relaxed with their full.
[02:19] So it seems like we had sort of up down and we're back on the up sort of thing.
[02:23] So that's how it feels like from my sort of real life experience.
[02:26] Yeah.
[02:26] Yeah.
[02:26] Mortgage rates definitely started to come down across the board which is really promising and quite sizable decreases as well.
[02:33] So it seems like at the moment they're starting to come down as quickly as they went up which isn't always the case.
[02:38] Um Neil, what where do you think we are with mortgage affordability at the moment?
[02:45] Yeah.
[02:45] Um obviously there's a quite a few factors in there.
[02:47] Um uh I think that the um inflation rates have just come out uh as of I think it was this morning actually.
[02:54] Um at 2.8, dropped down for 3.4.
[02:57] Um that's off the back obviously of um utility kind of pricing which has been on everybody's mind obviously since everything that's happened abroad at the moment.
[03:07] Um looking at um swap rates uh so swap rates are softening uh around the 2-year mark.
[03:14] Um 5year mark have.
[03:17] Softened a little bit.
[03:20] Uh 10ear mark actually are slightly increasing.
[03:22] So I think um obviously the markets do try and price in for future.
[03:24] Uh so that's something to be mindful of um when looking at it.
[03:30] Um although as I said the two years are softening a little bit at the moment.
[03:34] Um the markets uh as of this morning uh were talking about rate cuts as well.
[03:41] Um and uh because everybody's held for some some nice juicy rate cuts this year.
[03:45] Um I think we'd be lucky if there's no rate rises at the moment if I'm totally honest.
[03:49] But as as echoing what Arif has just said um in the last couple of weeks um it's almost as if um the markets have reset a little bit and then that obviously follows on to pricing because it's very very mindful for people at the moment that if they are going to remortgage to do something or they're going to move house is what will the future bills be um.
[04:12] Affordability stroke ONS has tedd a little bit lately with those bills um.
[04:17] But at the end of the day um it's all.
[04:20] Down to also the flexibility of the lend of what incomes and so forth they can take which we can be very flexible family.
[04:25] But, you know, going forward, things are looking a little bit brighter than most definitely they did when it was mid-March.
[04:34] So moving on then, what consumer trends have you noticed that point to the difficulties of first-time buyers getting onto the property ladder?
[04:41] I think there's a massive focus on cost versus renting versus cost versus mortgage.
[04:47] Which traditionally it's always been seen to kind of be cheaper to rent than it is to actually buy.
[04:54] I think with the rent increases happening and the housing stock shortage in the rental market pushing those monthly bills up for the rental market, things are starting to kind of shine a light on it's cheaper to get a mortgage.
[05:11] Which is really, really good going forward because obviously, at the end of the day, if they're paying a mortgage back, they're paying their own mortgage back, not somebody else's.
[05:20] Um, so from that point of view, um, it's very good.
[05:24] Housing stock is a big one because the amount of housing stock on the market for sale dropped quite dramatically towards the end of last year.
[05:35] Uh, beginning of this year it has been a little bit stifled, especially demographically in certain areas.
[05:42] Housing prices, mind you, have actually dropped, which is going to help everybody, really, to be honest.
[05:49] Uh, and you know, I've had quotes from brokers dealing in the West London market that pricing is kind of almost down to like 2017 times, you know.
[06:02] So that helps again.
[06:05] So it's, albeit there are difficulties out there getting on the property ladder because obviously while they're renting, they're not actually able to amass a deposit either.
[06:15] Uh, but there are great schemes out there like we have a family for that.
[06:16] Um, and then obviously.
[06:20] Reliance of the Bank of Mum and Dad, which I'm sure we're going to go into in a little bit more in a bit.
[06:25] So I wanted to come on to family help.
[06:27] Um, how important is financial help from the family becoming with regards to home ownership?
[06:32] Is it essential, Arif?
[06:35] Probably, I mean, from what I'm seeing, from what we're seeing, especially the kind of lending that we do, because we do a lot of guarantor mortgages, would be family system mortgages.
[06:46] And we're in a sort of situation where I think an average price is about eight times someone's annual income, and you'll be lucky to find a lender that would lend you eight times income.
[06:58] Um, I mean, if there's any, great, but not to my knowledge.
[07:03] So to push that extra gap between what the clients, the younger applicants themselves can borrow, that's where parents come in.
[07:11] And you know, there are many ways parents can help.
[07:14] Um, they can help with their money.
[07:17] They can help with their income by.
[07:21] Jumping on the mortgage.
[07:23] So yes, unless you're a very high earn ear earning firsttime buyer, parental help is um is required more often than not.
[07:32] And Neil, what do you see?
[07:33] Yeah, definitely.
[07:36] Um I it's it's becoming more and more uh I see that gifted deposits and um and kind of um family members rallying around not only younger buyers because it can actually be older buyers as well.
[07:50] Um there's a bit of a stat that I kind of I I saw was um and I'm looking at uh so over the last four years uh the Bank of Mad has actually um donated in commerce um 38.5 billion pounds towards uh the mortgage market which is which is kind of uh absolutely you know kind of massive as such and 9.6 billion pounds in the last year.
[08:18] Um, and that's with just within the UK mortgage market.
[08:20] Um, so it it is.
[08:22] Obviously a very, very large chunk of money that's been passed down.
[08:27] And you know, as Arif has alluded to, it doesn't necessarily have to be directly given.
[08:32] It can be portioned off, um, with products like the family mortgage where, you know, we can actually gain benefit from money, but it doesn't have to be directly, uh, given.
[08:41] So there's loads of innovation out there as well to help them on the ladder.
[08:45] Yeah, I mean, it brings me to my next point.
[08:47] You know, that figure that you said is staggering, and I saw similar data that came out from Savills where it showed that 52% of the first-time buyers relied on the bank of mom and dad and receiving on average £55,000 as a gift, and that's a huge sum.
[09:05] And I wanted to sort of, you know, ask you, Neil, what the impact on the bank of mom and dad is.
[09:11] They're going through the cost of living crisis like everybody else.
[09:15] They may not have a mortgage anymore, but they're certainly paying high energy bills, you know, they're going.
[09:22] To be feeling a squeeze in the budget.
[09:24] So, how does having to hand over a gift like that impact their financial resilience and what other options are there for them?
[09:33] I always kind of say uh kind of family building or we can kind of lend into quite kind of we can go to 95 years of age on lending.
[09:40] Uh, and so when we're talking about maybe a younger family member wanting to get onto the property ladder, sometimes it may not be just a direct guarantee being held by an older family member.
[09:52] It may actually be an old older family member that might be doing a capital raise to gift.
[09:55] Um and you know since we're kind of going down the old stat route um there is a a stat there which has actually been compiled by the FCA believe it or not um that um over 55s um the amount of equity in UK property uh is 3.7 trillion pounds um most of them baby boomers um so you know that is real uh.
[10:24] Untapped kind of source of um money that can be gifted to younger family members and so forth.
[10:30] So it where the lend comes, the mortgage comes, it may not actually be just the younger person, there may be an older person that may be able to take out a mortgage to gift and then the combination of the two will get that person on the property ladder.
[10:45] Do you think um Arif that there's enough innovation then in this part of the market to support families to support intergenerational lending or or does it need to be better catered for?
[10:57] It's a very relative uh question Sam depends on when you're looking from.
[11:00] If you're looking now compared to two years ago compared to 5 years ago, 10 years ago we're we're definitely in a much better place.
[11:10] Uh I mean we do 100% mortgage.
[11:13] There's a couple of lenders that will do 100% mortgage.
[11:14] You've got plenty of 95% tools available.
[11:16] Um, but does the market need more innovation?
[11:19] Um, it definitely does.
[11:21] Um, because we
[11:25] Need to somehow come to a conclusion that these young generation who want to get on the property ladder, their salaries are never going to be sufficient with the income multiples being borrowed to them by lenders to be able to buy what they want to buy.
[11:39] So, there needs to be a medium solution between lenders and consumers.
[11:40] And I think that's where uh families come in.
[11:44] Um families, it's a new phenomena for the families.
[11:48] Uh guarantor mortgages, you know, allowing a charge to be put on your property for 5 years from that's that's what our uh 100% mortgage requires.
[11:56] Or you know, mom and dad have retired now.
[11:59] They want to enjoy their retired life, but the kids say, "No, can you jump on the mortgage with me on a joint pro?"
[12:05] It's a new phenomena and I think there's a big educational piece that needs to be directed towards parents um which I think is slacking a little bit and slacking because the young generation understands the actual process and how it works but the old the parents may think okay I'm not too sure.
[12:25] About this, but there isn't much risk in it for them, very limited.
[12:31] Um, so it's it, we're in a much better place than where we were, but there's definitely more room to go.
[12:34] Well, we've run out of time for this episode.
[12:36] That was all really interesting.
[12:37] Um, thank you for listening in today.
[12:39] Um, hope you found that useful.
[12:42] Please do join us again for the next episode when we discuss low and no deposit mortgages.