Increasing the availability of 95% mortgages is one of a raft of measures the Building Societies Association (BSA) wants to be introduced to help more people become homeowners.
In a major report published today the BSA revealed how those first-time buyers who are successful in getting onto the property ladder have either had help from the Bank of Mum and Dad or have two incomes which are higher than average.
It means those without support or who are single remain stuck in the rented sector. 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 BSA revealed.
But this problem does not just impact those seeking to buy their first home. It also has a knock on effect on society and the housing market.
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.”
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First-time buyer advice – listen to the podcast
You can hear Paul Broadhead of the BSA talking more about the struggles first-time buyers face and hear his practical advice on how to prepare for your first mortgage in our latest podcast and video.
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What action is needed to boost homeownership?
Government action
The BSA wants the government to ‘urgently commission’ an independent review to set out a long-term plan to boost the number of first-time buyers. It said the findings should be published within 12 months.
The review should aim to seek solutions to make homes more affordable, available and more appropriate to the needs of those living in them.
More 95% mortgages
Following the financial crisis in 2008, rules around mortgages became much stricter but this, said the BSA, has swung the pendulum away from the social benefits of higher homeownership.
One example of this is that low deposit mortgages, where borrowers require just 5% as a down payment, have become less easy to obtain and more scarce. The BSA said this needs to be addressed so that buyers with smaller deposits can access more 95% mortgages.
Cap on high loan-to-income lending
The loan-to-income multiple is a calculation lenders use to decide how much money they can lend to a potential customer. They will divide the value of the loan by the borrower’s income to calculate their affordability.
Following the tighter lending rules there is a cap in place which prevents lenders offering loans at a higher multiple than 4.5x a borrower’s income.
The BSA thinks this needs to be changed if more first-time buyers are to access the homeownership.
Mortgages in retirement
The BSA also wants a review on the pre- and post-retirement mortgage market to ensure lending regulations better reflect the increase in longer mortgage terms and the ageing population.
