"New thinking and radical changes are needed"
A report by the Building Societies Association (BSA), set for release next month, highlights the need for major reforms to support first-time homebuyers in entering the housing market, without adversely affecting future generations’ prospects.
Authored by housing specialist Neal Hudson, the report examines the balance between financial stability and increasing the number of first-time buyers. Findings indicate a post-financial crisis shift towards financial stability, which has sidelined potential homebuyers.
The report also suggests several necessary reforms, including a re-evaluation of the trade-offs between a strict regulatory framework and higher homeownership rates, to find a balance that promotes financial stability while facilitating access to home ownership.
It also calls for regulatory changes to introduce more flexible mortgage options, such as loans allowing a mix of repayment and interest-only payments, and a review of the 15% cap on lending at 4.5 times a borrower’s income, with a focus on supporting first-time buyers.
Affordability remains the largest obstacle for first-time buyers, with the initial deposit and ongoing mortgage repayments posing significant challenges. This has been exacerbated by recent interest rate hikes, as indicated in the BSA Property Tracker Report, making mortgage affordability the primary concern for prospective buyers.
Despite building societies’ innovative efforts, which account for approximately one third of first-time buyer mortgages, the report argues for more profound reforms to address the issues plaguing the housing market.
“A properly functioning housing market is dependent on first-time buyers being able to afford their first home,” said Paul Broadhead (pictured), head of mortgage and housing policy at the Building Societies Association. “While building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.
“Many things can be done to fix the broken housing market. But we need to ensure that changes to regulations and support schemes not only help today’s first-time buyers, but don’t fail future generations.”
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