The decline of high loan-to-value (LTV) mortgage lending in the UK has led to a 1.8m shortfall in the number of first time buyers since 2007, according to a new report from Genworth.
The global mortgage insurer’s report highlights how tougher regulation and higher capital requirements for lenders have accelerated the fall in homeownership and dramatically reduced the number of people – especially younger households – who are able to buy their first home.
Genworth is calling for a new system of mortgage insurance that would give first-timers more opportunity to get onto the property ladder with a low deposit but still protect the financial system.
Using government and industry data, Genworth’s analysis shows people entered owner-occupation at a consistent rate from 1985 to 2006, with 10.26m buying their first homes, only slightly under the expected 10.29m based on population trends.
But since 2007, an unprecedented collapse has taken place, creating a large and persistent deficit in first time buyer numbers.
The combined effect over seven years from 2007 to 2013 is a shortfall of 1.8m first time buyers against expected demand. Put simply, 1.8m of the UK population who would have been expected to buy their first home since 2007 have not done so.
Even with the government’s Help to Buy schemes in place, figures for the first six months of 2014 indicate there will be 296,200 first time buyers this year when demographic trends suggest there should be 500,000 to satisfy demand.
This annual deficit of 41 per cent or 203,800 will push total frustrated demand from the previous 1.8m to beyond 2 million.
