Expert: Lewis Scott, CEO, Homely Global Facilitator: Kathy Ellison, Director, Savanta
Headlines:
- 87% of young people and renters aspire to become homeowners but are struggling to get out of the rental trap and realising the dream of homeownership
- We should be helping renters to become home owners while at the same time not stigmatising renters - it should be a consumer choice
- Though there are more renters today than in recent times, higher numbers renting has been the case in the past and is the case in other countries
Discussion points:
Although finance is one reason for restricting the ability to buy, there are also demographic reasons for this generation to remain renters longer - many are students for longer or don’t find a partner or settle down as early in life as previous generations.
It should be the responsibility of all stakeholders to educate and build understanding to help this generation buy their own home.
Young people need to prepare in advance and understand the steps and implications, they need to think long term, so messages need to start from an early age and come from a number of sources. This needs to include lenders and brokers but also home buying planners, estate agents, families, government, NFPs, educators and the media.
Some participants shared that they had spent significant sums advertising to first time buyers and/or have taken part in educational programmes.
Many estate agents handle both renting and buying and do a good job of actively engaging with tenants to see if buying may be a good idea; this is especially true where brokers partner with them as part of a group. It was agreed that they are a conduit who need to play their part in educating consumers in the pros and cons and the options and schemes available.
There was a debate about the role of media in explaining to this generation about these pros and cons and not scaremongering. Social media influencers have been vocal in this space but can be misleading. All agreed that education should start with schools, and some felt the government was failing in their role of guiding the curriculum here.
The market is being more innovative in the use of data and apps to offer better rates and tailored offerings and help a renter plan ahead and budget better.
The discussion centred around the fact that data and tech are important but to stimulate the market we need some old school methods and some common sense too. We were reminded that people move less often than they used to, on average only 3 times and move only every 7 to10 years, so buying is a big decision and not done often.
Some lenders are using data in a wide variety of ways such as data on the area, the property and the person. Though open banking has certainly not captured the public imagination, lenders and fintechs have found great ways to use it to ‘hyper-personalise’ the journey and help assess needs and spending.
Specialist panels are available for borrowers with specialist needs such as people with CCJs and new models are being designed to calculate affordability.
Open banking data has been used innovatively in screening potential borrowers to offer different terms such as LTVs of up to 95% or higher ratios of income by looking at the longer-term potential. And understanding the user has been made even more sophisticated by AI/machine learning, which is helping understand what the right product for right person could be.
Though some of the group were a little cynical of Apps being the only solution, a number of good ones were praised, encouraging this generation to budget and become more engaged. Apps are being used to undertake the search for homes and all the information gathering, so are perfect for the early stages of the journey to home-ownership; but after that, there is no substitute for speaking to someone.
Mortgage brokers can use a network of people around them, as are often a central cog in the wheel. A warning note was raised by one participant, that as more self-serve becomes available, we may not need brokers so we need to use our skills and connections.
There are of course many different brokers: some have a relatively simple, narrow remit, with clients only coming in for a mortgage; others are more general and offer more holistic financial planning. It is this bigger picture that can be most useful, especially those who have multiple generation clients and can work with the parents of adult children who are starting to rent to explore future plans and consider intergenerational lending.
It was noted that this was common in farming, where debt is passed down, and common in other countries. With innovative design, this could be an alternative way forward and could have positive impacts on inheritance tax etc.
Key takeaways:
- Mortgage brokers and financial advisers have an important role to play including building up a new way of thinking of inter-generational lending
- There is an ongoing need for formal education for young adults to prepare them for life in terms of longer-term financial planning and understanding their options
- The key message for the industry is that of working together and looking further afield to bring in new truly innovative ideas
- There is a call to action for all stakeholders to explore how mortgages and home ownership can be considered more in an inter-generational way
