Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

First-Time Buyers Face Dual Barriers, Says Atom Bank’s Harrison

A recent report by Mortgage Solutions highlights the ongoing challenges faced by first-time buyers in the UK, as policymakers launch a consultation into a new First Time Buyer ISA. The proposed ISA would replace the Lifetime ISA (LISA), aiming to simplify government bonuses and remove potential withdrawal charges.

Richard Harrison, head of mortgages at Atom Bank, notes that while deposit requirements remain a significant barrier to homeownership, they are not the only challenge. Harrison points out that some first-time buyers, despite saving a deposit, struggle to secure mortgage finance due to not meeting prime lender criteria. These individuals, often referred to as the ‘missing middle’, may have minor credit issues such as a missed mobile payment or a thin credit file, despite having stable incomes and the ability to afford repayments.

Harrison explains that these buyers are disadvantaged by both their credit history and limited deposit, making it harder to access the housing ladder. He emphasises that the housing market as a whole is affected when first-time buyers cannot access the first rung, as this impacts the ability of existing owners to move.

Feedback from brokers, according to Harrison, indicates a need for more lending options for clients who fall outside prime criteria. He also notes criticism of lenders for treating all ‘non-prime’ borrowers the same, regardless of the severity of their credit issues. Harrison suggests that lenders should focus on ensuring fair access to finance for those with limited credit histories, rather than excluding them from homeownership.

Atom Bank has responded by increasing the maximum loan to value (LTV) on its near prime products to 95%. Harrison argues that solutions for first-time buyers should address both deposit and credit history challenges together, as these issues often coincide.

This discussion is particularly relevant for UK letting agents and inventory clerks, as the ability of first-time buyers to access the market can influence rental demand and property turnover.