simplybiz. co. uk 17
... we need to look for new, potentially radical, solutions to this age-old problem
There have been many initiatives over the last decade aimed at helping first-time homeowners achieve their ambition. For example, 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, shortsighted,‘ quick fixes’ and the growing difficulty for first-time buyers to buy a home, the Building Societies Association( 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 Neal to identify potential long-term solutions that would not only support today’ s firsttime buyers, but also the next generation of homebuyers. We were clear that we need to look for new, potentially radical, solutions to this age-old problem.
The report was published earlier in 2024, and it has some clear recommendations for both government and the regulators. The starting point is for the new labour government to implement a short, but thorough independent review of the first-time buyer market, regulations and interventions, which will identify a clear starting point for action.
To do this effectively, engagement with lenders, the wider housing market industry, including advisers and the public, is necessary, 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 firsttime buyers.
We would expect the review to result in improved supply of homes, revised planning systems with greater focus on strategic planning and less focus on development control and a revised property taxation where Stamp Duty( SDLT) continues to favour first-time buyers. It should also include improving the quality, security, and affordability of the private rented sector.
We urge Angela Rayner, Secretary of State for Housing, Communities and Local Government, and the new housing minister, Matthew Pennycock, to make this a priority. Their timeline should be short – three months for the review with its recommendations implemented within the following six to nine months.
Turning to 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 with the inevitable cost of many being excluded from homeownership. We suggest the relative costs and benefits of this approach should be reviewed and 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 also 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 and effective housing market.
We also call for changes to more easily allow part-repayment and part-interest only lending during the course of a mortgage, with the flexibility to shift between them, as a borrower’ s needs change. We’ re thinking mortgages that suit the borrowers circumstances throughout the full term.
The FCA’ s current review of their conduct rules in light of the Consumer Duty provides the ideal time to review and simplify their requirements, whilst ensuring consumer protections remain. It’ s encouraging that the regulator has stated its aim is to support innovation by removing prescriptive requirements and allowing greater flexibility on issues that are reflected in the Consumer Duty.
However, there is a balance to be struck. A standardised, more detailed approach to regulation can provide certainty and consistency for the industry and consumers, which shouldn’ t be ignored. But we do need to remove duplications between the rulebook and Consumer Duty to avoid confusion and overlap. So whilst there is much to consider, I think we can all welcome the appetite the FCA appears to have to support changes.
Whilst 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, we must take action to fix the broken 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 firsttime 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.
To read the content of the BSA’ s First Time Buyers report in your own time, download your own copy now:
www. bsa. org. uk / information / publications