Commentators have come out in support of Genworth’s report saying the government must help reform the market in favour of first-time buyers.
The report reveals a 1.8m shortfall in the number of first time buyers since 2007 compared with expected demand as tougher mortgage regulations and capital requirements take their toll.
Ray Boulger, senior technical manager at John Charcol, comments:
“Apart from the human misery and lack of security caused to potential first time buyers by the limited availability and high cost of 95 per cent mortgages, it also increases the social divide.
“It is clear that radical action is needed quickly for there to be any chance of avoiding the serious macro-economic problems which will be caused as a result of a large increase in the proportion of the population retiring without owning a property.
“Genworth’s report sets out very clearly the issues around the apparent failure in the high loan to value (LTV) mortgage market.
“Lenders’ funding problems have now been superseded by a capital problem. As Genworth highlights, the main factors holding back more and cheaper high LTV lending are now regulatory.
“There is a strong argument to suggest that what was undoubtedly initially a market failure has now metamorphosed into a regulatory failure.
“Either the government believes the stricter, and increasing, regulations now in place are necessary to protect the integrity of our bankin
g system…or it now recognises the regulations are causing unintended consequences, in which case it should change the regulations.”
He adds: “Because the government charges exactly the same to every lender, those lenders with a good delinquency rate are effectively subsidising those with a higher delinquency rate.
“In contrast, the private sector offers insurance priced on an assessment of each separate risk, which is a much healthier arrangement and a concept the government should support.”
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), comments:
“Although we’ve witnessed a resurgence of first time buyers over the past year, we must not get carried away with hysteria as there’s a real danger this could be short lived if we do not plan for Help to Buy’s departure.
“The proliferation of new regulations and capital requirements has tightened the market by limiting borrowing options and restricting lenders’ ability to serve the full range of creditworthy consumers.
“The mortgage market is making solid progress in recovery, but we’re still some way off ‘normality’. Temporary injections like Help to Buy are needed to counterbalance the stricter lending landscape, but safeguards must be put in place to ensure we don’t become reliant on short-term treatments.“Combine these elements with the dearth of new house building and the reaction could be the permanent undermining of homeownership in the UK, as shown by these latest findings from Genworth.
“Otherwise the market, and particular the first time buyer segment, will get a harsh dose of reality when the rug is pulled from beneath it.
“Clearly the long-term solution is an increase in housing supply, and a thriving insurance market will play a pivotal role in helping to upscale building.
“But in the more immediate term, there’s a real need to expand the low cost housing market with a product that lenders are able to fully support.
“As a nation of homeowners the political impetus is patently clear, and therefore the government would be well advised to work with the industry to develop a longer term cure to replace measures like Help to Buy.”
