First-time Buyer  

Govt urged to help young people buy property

Specifics could include a less restrictive ‘stress test’ for fixed-term mortgages and stamp duty incentives for downsizers.

Just this year broker firm John Charcol urged the Bank of England to rethink the "anachronistic" way mortgage applications were stress tested to allow more consumers to access the market.

The BoE’s Financial Policy Committee currently requires mortgage applications to be stress tested at 3 per cent above the mortgage policy’s reversion rate — the rate the consumer will be 'reverted' to once any initial deal has finished.

This is typically a bank’s standard variable or follow on rate, which currently sits at an average of about 3.5 per cent or above, so most mortgage applicants will have to prove they can afford their mortgage policy at a minimum rate of 6.5 per cent for a five-year forecast.

But Kevin Dunn, director at Furnley House, said the reality was the government had been “paralysed” for the last couple of years over Brexit and this was likely not to change soon.

He said: “So unfortunately, I don’t see anything radical being introduced from the government in the near future to help.

“Restricting the Help to Buy Equity Loan scheme to first time buyers in April 2021, which is already in place, could help developers focus more on affordable homes for first time buyers rather than bigger high-end properties which are more suited to movers – this should help increase supply.”

Mr Dunn also thought the limits on a Lifetime Isa — which currently offers a 25 per cent government boost for savings for a house deposit or pension — could help first-time buyers focus and save.

Carl Shave, director at Just Mortgage Brokers, said: “The findings certainly show the plight of the first-time buyer to purchase their own home continues to be a struggle and for some it is seen as nothing more than a pipe dream.

“First-time buyers are the catalyst for many home movers to purchase their onward home and unless the matter is addressed it will likely create wider issues.”

Earlier this year, Steve Brown, branch manager at Winkworth Estate Agents in Blackheath, said it would be "disastrous" if first-time buyer numbers dropped because they helped the market move.

Mr Shave said there were no “easy or quick fixes” but said the Help to Buy scheme and stamp duty cuts had been welcomed by the industry.

However, according to him, ultimately supply of housing needed to improve.

But last month a damning report by the Public Accounts select committee stated the government had “wasted a once-in-a-generation opportunity” to alleviate the nation’s housing crisis by failing to release land for new homes.