Paul Broadhead, Head of Mortgage & Housing Policy, BSA

Writing here I know I’m preaching to the choir when I say that a properly functioning housing market relies on first-time buyers being able to afford to buy a home of their own, and the fact that today many can’t is the biggest problem for the UK’s housing market. 

But we’ve been saying this for years, decades even, and yet now it is probably the most expensive it has been in the last 70 years for first-time buyers to get into homeownership.

There are, and have been over the last decade, several initiatives to help first-time buyers.  Government has stepped in with initiatives, such as Help-to-Buy in many guises, Lifetime ISAs and stamp duty holidays. Whilst these schemes have undoubtedly helped many to buy their first home, they are generally short-term and most have had other longer-term, unintended consequences that negatively impact the prospects of future first-time buyers. Effectively they have just kicked the can down the road.

Frustrated by the short-term, short-sighted, ‘quick fixes’ and the growing difficulty for first-time buyers to buy a home, the BSA along with the five biggest building societies commissioned housing market expert, Neal Hudson, to look into the issues impacting first-time buyers. We asked him to identify potential long-term solutions that would support not only today’s first-time buyers, but also the next generation of homebuyers. We were looking to find new, potentially radical, solutions to this age-old problem.

The report was published on 22nd April and it has some clear recommendations for both government and the regulators. The starting point is a short, but thorough independent review of the first-time buyer market, regulations and interventions, which will identify a clear starting point for action. The author would need to work with lenders, the wider housing market industry, including brokers, and the public, with an aim to make homes more affordable, more available and more appropriate to the needs of those living in them. This in turn would increase access to the housing market for a number of first-time buyers. 

As quick, but well thought through, action is needed, there is no time to delay so the timeline for the review needs to be short, say 3 months, with its recommendations implemented within the following six to nine months. 

For the regulators, our report recognises that there is a balance to be struck between financial stability and the number of first-time buyers, but it suggests that since the financial crisis this pendulum has swung too far towards financial stability at the inevitable cost of many being excluded from homeownership. We suggest the relative costs and benefits of this approach should be reviewed. We expect this will lead to an increase in the availability of 95% loan-to-value mortgages and an adjustment to the cap on lending above 4.5 times income when targeted at younger homebuyers. 

Other changes to MCOB rules are required, along with a strategic review of the pre and post-retirement mortgage lending rules to recognise the increase in longer mortgage terms and the ageing population. A mortgage market that offers more flexibility to borrowers prior to and entering retirement could make it easier for older borrowers to ‘right size’ and is another tool that should help to create a more efficient housing market. 

As building societies, our raison d’etre is – and has been for almost 250 years - to help people into homeownership, as well as providing a safe home for those with savings. Whilst a number of societies are finding innovative ways to support first-time buyers within the current regulatory environment, such as Skipton’s 100% LTV mortgage; Yorkshire’s £5,000 deposit mortgage and Leeds’ partnership with Experian, the credit reference agency, we now need government and regulators to play their part in stablising the UK housing market and supporting all first-time buyers – that’s those wanting to buy their own home today and the next generation of first-time buyers. 

Building societies have the potential to increase their lending to first-time buyers, it’s time for radical policy and regulatory action to allow them to do just that.