The divide between those able to afford to own a home and those not will grow without intervention warns the Building Societies Association (BSA) in a new report.
The long-term strategy report Finance for a Fairer Future from the BSA warns home ownership will become the “central dividing line of financial security in Britain by 2050”, increasingly dependent on family wealth rather than hard work and savings.
The BSA suggests financial institutions will need to evolve beyond traditional mortgages and savings accounts and develop new ways to support people through every stage of their financial lives, from building savings and buying a first home to managing later-life finances and intergenerational wealth.
Over the next 25 years, home ownership will become much more dependent on family and intergenerational wealth and housing wealth will increasingly play a part in supporting later life care costs, the BSA suggests in the report.
Technology will also radically change how people live, work and access money: “AI will improve productivity and services for many, but will also create new risks: job disruption, digital exclusion, more sophisticated crime and weaker trust. As financial services become more automated and data more distributed the need for trusted human judgement will become more acute.”
A shift towards weaker financial resilience will see variable incomes, higher debt, limited savings buffers and later life living costs – particularly where old age brings health challenges – all contribute to financial vulnerability. The family home will increasingly become the asset families rely on to support future generations, the report adds.
While the BSA says building societies are playing their role in supporting home ownership ambitions, much more needs to be done. “Innovative lending criteria” and a wider range of mortgage options are contributing to more than 360,000 mortgages provided by building societies to first-time buyers over the past three years.
Just over a third (39%) of all building society owner-occupied lending in the last 12 months went to people buying their first home. As financial lives become more complex, this innovation will need to continue at pace, the report suggests, with the development of products and services that better reflect modern financial lives. This includes expanding support for people with irregular incomes, better financial wellbeing guidance, later-life lending, intergenerational finance and new ways to help households build resilience before they face financial shocks.
Sarah Harrison, chief executive of the Building Societies Association, said: “Home ownership has long been one of the foundations of financial security in Britain. But unless we act now, we risk creating a society where owning a home depends less on hard work and careful saving, and more on whether your family has the wealth to help you onto the property ladder.
“At the same time, people’s financial lives are becoming more complex. More variable incomes, longer lives and greater personal financial responsibility mean households will need trusted support to build resilience throughout their lives.
“Building societies are already showing that there are different ways to help people achieve home ownership, including many who might otherwise think buying is out of reach, and are helping millions build stronger savings habits. As people’s lives continue to change, we need to ensure the sector has the freedom to keep innovating, developing new products and services that reflect how people live and work today, while remaining true to our purpose of improving members’ financial wellbeing.”
An open letter to the prime minister, signed by the building society and credit union chief executives who are members of the BSA, expresses support for the BSA’s new strategy, and calls on government to update the “outdated legislation which is holding the sector back”.
