Supporting first-time buyers requires new thinking and radical changes, according to the Building Societies Association (BSA).
The organisation, which represents the UK’s mutuals, thinks that the balance between financial stability and growing the number of first-time buyers has “tilted too far in favour of financial stability” since the credit crunch.
It said this tighter regulation has excluded prospective homeowners from the market.
Change needed
A new report from the BSA will call for significant regulatory changes to help aspiring first-time buyers onto the property ladder.
The organisation said reforms are needed to make sure homes are “more affordable, more available and more appropriate for those living in them”.
The report will call for the following three changes to make it easier to lend more to first-time buyers:
- A review of the costs and benefits of a stricter regulatory environment versus those of higher homeownership rates, to strike the right balance between financial stability and enabling access to homeownership.
- Changing regulation to allow mortgages to be more flexible. This could include allowing more part-repayment, part-interest-only lending – with the flexibility to shift between them over the life of the loan.
- A review of the 15% cap on lending at four-and-a-half times income, including whether it should specifically support first-time buyers.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “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.
“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.”
Related: Borrowers turn to longer mortgage terms to cut monthly costs
