Building Societies are supporting struggling first-time buyers and calling on the government and regulators for ‘radical change’ to ‘fix the broken housing market’.
Increasing the availability of 95% mortgages is one of many measures the Building Societies Association (BSA) wants to introduce to help more people become homeowners.
In a major report published today, the BSA has revealed how first-time buyers who manage to get onto the property ladder have received help from the Mom and Dad’s couch or have two incomes that are higher than average.
It means that people without support or single people remain stuck in the rental sector. In March 2024, 32% of people reported that they want to buy their own home, but think this will not be possible, according to the BSA.
But this problem doesn’t just affect those looking to buy their first home. It also has a domino effect on society and the housing market.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “Becoming a first-time buyer may be the most expensive in the last 70 years, but a well-functioning housing market depends on first-time buyers. can afford their first home.
“As building associations create bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.
“There is no silver bullet to increasing the number of first-time buyers in the housing market and it will not be possible to help everyone who wants to become a homeowner in today’s high price-to-income housing market. But there are many things that can help fix the broken housing market.
“That starts with changes in regulations and support schemes that not only help today’s starters, but also do not abandon future generations.”
Advice for first time buyers – listen to the podcast
You can hear Paul Broadhead from the BSA talk more about the issues facing first-time buyers and hear his practical advice on how to prepare for your first mortgage in our latest podcast and video.
What measures are needed to stimulate home ownership?
Government action
The BSA wants the government to ‘urgently’ conduct an independent study to draw up a long-term plan to increase the number of starters. It says the findings must be published within 12 months.
The review should focus on finding solutions to make homes more affordable, available and better suited to the needs of those who live in them.
More 95% mortgages
After the 2008 financial crisis, the rules around mortgages became much stricter, but this, according to the BSA, has swung the pendulum away from the social benefits of higher home ownership.
An example of this is that low deposit mortgages, where borrowers only need 5% as a down payment, have become less easy to obtain and scarcer. The BSA said this needs to be addressed so that buyers with smaller deposits can access more 95% mortgages.
Ceiling for high loan-to-income loans
The loan-to-income multiple is a calculation lenders use to decide how much money to lend to a potential customer. They divide the value of the loan by the borrower’s income to calculate its affordability.
As a result of the stricter lending rules, there is a cap in place that prevents lenders from offering loans higher than 4.5x the borrower’s income.
The BSA believes that this must change if more starters want to gain access to home ownership.
Retirement mortgages
The BSA also wants the pre- and post-retirement mortgage market to be reviewed to ensure that lending regulations better reflect the increase in longer mortgage terms and an aging population.