BSA wants major housing market reforms

It proposes government collaboration with lenders, industry professionals, and the public

BSA wants major housing market reforms

The Building Societies Association (BSA) has issued a call for government action to address the challenges faced by prospective first-time homebuyers.

The call follows the release of a new report, authored by housing expert Neal Hudson, highlighting the increasing dependence on financial help from parents and the necessity for dual incomes above the average to secure homeownership.

The BSA report also points out the exclusion of single individuals and those on lower incomes from the property market, with a March 2024 survey revealing that 32% believe homeownership is out of their reach.

The primary hurdle is affordability, influenced by both the initial costs of purchasing a home and the ongoing expenses of ownership. The BSA’s findings showed that recent interest rate hikes have exacerbated the issue, making mortgage payments the top concern for potential buyers.

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Despite building societies providing about one-third of first-time buyer mortgages and being capable of offering more, the report pointed out the need for significant reforms to address the broader issues in the housing market.

The BSA proposes that the government collaborate with lenders, industry professionals, and the public to enhance the affordability, availability, and suitability of housing. It calls for an independent review to develop a long-term strategy to increase first-time homeowner numbers, with recommendations to be published and acted upon within a year.

Regulatory adjustments are also suggested to aid those marginally able to buy homes, such as increasing the accessibility of 95% loan-to-value mortgages and revising limits on high loan-to-income lending. The group also recommends examining mortgage regulations concerning both pre- and post-retirement periods to adapt to longer mortgage terms and an aging population.

“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,” 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. 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.”

The Intermediary Mortgage Lenders’ Association (IMLA) said it fully supports the BSA in its calls for government reforms to assist first-time buyers and address the UK’s housing crisis.

“We welcome the BSA’s timely report on the challenges facing first-time buyers and their recommendations for a government review of the market, regulation and housing policy,” stated Kate Davies, IMLA executive director. “There is a viable argument for government-backed first-time buyer support, which must be accompanied by a sustainable plan to deliver more quality, affordable housing on a major scale, in both the private and social sectors.  

“In the meantime, IMLA believes that government needs to acknowledge the crucial role buy-to-let landlords play in the private rented sector, which provides homes for almost 20% of the UK’s households. We believe landlords deserve more support, rather than a punitive tax and regulatory regime which threatens to push many out of existence, exacerbating the shortage of rental properties available and pushing up the cost of rent for the remainder.”

Also commenting on the BSA call, Rachael Sinclair, Nationwide’s director of mortgages and financial wellbeing, stressed that without a collaborative approach, the wheels will likely spin on the homeownership crisis indefinitely.

“Getting onto the property ladder remains as tough as ever, with our latest research showing that one in five prospective homeowners don’t think they’ll be able to buy until their forties,” she said.

“Collaboration is key if we are to resolve the first-time buyer conundrum and is why we are pleased to have worked with the Building Societies Association on this report, which calls for an independent review of the first-time buyer market.”

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