Calls for ‘radical change’ to fix broken housing market

A new report from the Building Societies Association (BSA) 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.

This 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. Those without family help, are 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.

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.

With more than 2 million fewer owner-occupier mortgages since the peak in 2002, the BSA is calling on 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.

Alongside policy action, regulatory changes are needed particularly to support those on the fringes to buy their own home.  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, according to the report. Commenting on the findings, Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said:

“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.

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.”

Katie Pender, managing director of Target, said:

“The BSA’s report is a wake-up call to the industry and Government on the huge challenges facing first-time buyers and we very much endorse their recommendations.  Unless there is significant change, the outlook for those first-time buyers is very bleak indeed. There are far too many people who are struggling to get on the housing ladder. While relatively high mortgage rates, coupled with the steep rise in the cost of renting, is exacerbating the situation, the adoption by lenders of the latest new technology has a vital role too in speeding up decision-making and improving customer satisfaction. We will continue to support lenders to innovate.”

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