“Radical change” is needed to fix the UK’s “broken” housing market, a report from the Building Societies Association has argued.
The Property Tracker Report, written by housing expert Neal Hudson, suggested that “significant changes” are required to help prospective first-time buyers get onto the property ladder in the current housing market.
It found the ability to become a first-time buyer is increasingly dependent on the “Bank of Mum and Dad”, while successful first-time buyers increasingly need to have two incomes that are higher than average.
Meanwhile, those who do not have family help, are single or are on lower incomes, are being excluded from homeownership.
BSA head of mortgage and housing policy, Paul Broadhead, explained: “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.”
The biggest challenge facing first-time buyers was affordability, consisting of both the cost of buying and owning a home.
The report stated that, while deposit sizes have been a barrier to homeownership for some time, recent interest rate rises have led to affordability of mortgage repayments being cited as the biggest challenge for would-be first-time buyers.
The report also acknowledged progress in this area, stating that building societies have a “strong track record” of providing innovative solutions to support first-time buyers and are responsible for around one third of first-time buyer mortgage completions.
However, Broadhead added: “While building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.
“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.”
Action
As a result, the BSA called on the government to “commit to working with lenders, the wider housing market industry, and the public” to make homes more affordable, available and appropriate to the needs of those living in them.
To achieve this, the association called on 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.
It added the government should commit to the findings being published and implemented within 12 months.
Alongside policy action, the BSA also called for regulatory changes to support those on the fringes to buy their own house.
The association also stated that the pendulum, which since the financial crisis has swung towards a stricter regulatory environment rather than higher rates of homeownership, should be reviewed to increase the availability of 95 per cent loan-to-value mortgages.
Other areas of regulation where more flexibility is required, according to the BSA, includes the cap on high loan-to-income lending.
Additionally, it added that 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.
