"Whilst building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed."
- Paul Broadhead - BSA
A new report from the Building Societies Association has found that significant changes are required if we are to help prospective first-time buyers get onto the property ladder in the current housing market. It also warns that policy solutions that help today’s first-time buyers mustn’t compromise the homeownership prospects of future generations.
The report, which has been written by housing expert Neal Hudson, finds that the ability to become a first-time buyer is increasingly dependent on the so-called Bank of Mum and Dad, while successful first-time buyers increasingly need to have two incomes that are higher than the average.
Meanwhile, those without family help, single or on lower incomes are being excluded from homeownership. In March 2024, 32% of people reported that they want to buy their own home but don’t think they will be able to.
Affordability
The biggest challenge facing first-time buyers is affordability – both affording the cost of buying a home and the cost of owning a home. The sizeable deposit generally required to get on the property ladder has been a barrier to homeownership for some time.
However, the BSA Property Tracker Report shows that the recent interest rate rises have led to affordability of mortgage repayments being cited as the biggest challenge for would-be first-time buyers.
Building societies have a strong track record of providing innovative solutions to support those taking their first step onto the property ladder and are responsible for around one-third of first-time buyer mortgage completions. However, whilst they have the capacity to lend more to first-time buyers, radical reform is needed to fix our broken housing market.
Action
With more than 2 million fewer owner-occupier mortgages since the peak in 2002, the BSA is calling on the government to commit to working with lenders, the wider housing market industry, and the public, with the sole aim of making homes more affordable, more available, and more appropriate to the needs of those living in them.
The BSA is urging the government to commission an independent review to set out a long-term strategy that will increase the number of first-time buyers, both now and in the future, with a commitment that the findings will be published and implemented within 12 months.
Alongside policy action, regulatory changes are needed particularly to support those on the fringes to buy their own home.
The pendulum, which since the financial crisis has swung towards a stricter regulatory environment rather than towards the social benefits of higher rates of homeownership, should be reviewed to increase the availability of 95% loan-to-value mortgages.
Other areas of regulation where more flexibility is required include the cap on high loan-to-income lending. A review of the pre and post-retirement mortgage market would also ensure lending regulations better reflect the increase in longer mortgage terms and the ageing population.
Paul Broadhead, Head of Mortgage and Housing Policy at the BSA comments: “Becoming a first-time buyer is possibly the most expensive it has been over at least the last 70 years, but a properly functioning housing market is dependent on first-time buyers being able to afford their first home. Whilst building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.
Paul concludes: “There is no silver bullet to increasing first-time homebuyers and it won’t be possible to help everyone who wants to become a homeowner in the current high price-to-income housing market.
"But there are many things that can help to fix the broken housing market. That starts with changes to regulations and support schemes that not only help today’s first-time buyers but don’t fail future generations.”
Meanwhile, the Intermediary Mortgage Lenders’ Association (IMLA) has said that it fully supports BSA's calls for government reforms.
IMLA advised that solutions may include a revival of some sort of government scheme to support aspiring homeowners, possibly along the lines of the now defunct Help to Buy scheme, an extension to the Lifetime ISA criteria, or new Stamp Duty concessions for first-time buyers, for example.
Kate Davies, Executive Director of IMLA, said: “We welcome the BSA’s timely report on the challenges facing first-time buyers and their recommendations for a Government review of the market, regulation and housing policy.
“The UK is an advanced economy which is home to one of the most diverse, competitive and innovative mortgage industries in the world. And yet we are in the midst of a housing crisis, with fewer affording to buy a home, and more renters struggling to secure accommodation.
“There is a viable argument for Government-backed first-time buyer support, which must be accompanied by a sustainable plan to deliver more quality, affordable housing on a major scale, in both the private and social sectors.
“In the meantime, IMLA believes that the government needs to acknowledge the crucial role buy-to-let landlords play in the Private Rented Sector which provides homes for almost 20% of the UK’s households.
"We believe landlords deserve more support, rather than a punitive tax and regulatory regime which threatens to push many out of existence, exacerbating the shortage of rental properties available and pushing up the cost of rent for the remainder.”
