Govt urged to help young people buy property

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Govt urged to help young people buy property

A first-time buyer study, published by the lender on Wednesday (July 31), showed although nine out of 10 young people wanted to get on the property ladder, the reality was that by 2026 just one in four under 34s were set to achieve that goal.

The lender polled 5,002 non-homeowners earlier this year and found 70 per cent of potential first-time buyers believed the ‘homeownership dream’ was over for young people, with 64 per cent expecting homeownership to fall even further for future generations.

This was despite the fact more than half (51 per cent) of those surveyed said owning their own home was one of their top life goals — more so than having children (27 per cent) or getting married (19 per cent).

From the research, Santander forecasted that by 2026 the number of under 34s owning a home would have halved compared with 2006.

Miguel Sard, managing director at Santander Mortgages, said it was clear the aspiration to own a home was just as strong as previous generations but looked “increasingly out of reach”.

He said that without change homeownership was at risk of only being available to the wealthiest young buyers and that the findings should be a “wake-up call” for the industry and the government.

The findings showed the biggest barrier cited by first-time buyers to get on the ladder was raising a deposit (30 per cent) followed by affordability problems surrounding their income (15 per cent).

At the same time most first-time buyers were underestimating the size of the deposit they needed to save and two fifths said they had saved nothing towards their first-home.

The report stated the average age of a first-time buyer had increased from 25 to 33 years old over the past two decades and 40 per cent of new homeowners now already have a family.

According to Santander, this meant the most sought-after first-time buyer property was a three-bedroom house.

The report also showed 39 per cent of first-time buyers had help from living family and 10 per cent from inheritance, but the lender warned costs of ‘later life’ could lead to future financial challenges for those gifting wealth.

Nearly three quarters (74 per cent) of those polled believed the government should do more to help first-time buyers.

More than a third (37 per cent) wanted the Help to Buy scheme extended beyond 2023, 35 per cent wanted a cap on rent prices while a further third (33 per cent) would like to see stamp duty relief extended to the first £500,000 of a property’s value.

Through the report, Santander called on the industry and government to think radically to ensure young people's dream was “kept alive”.

It said the government and industry needed to think about backing new lending models to help those without family support to raise a deposit, more flexibility in lending affordability criteria, and a better use of existing housing supply by encouraging greater circulation of homes.

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.

The committee said the Ministry for Housing, Communities and Local Government would miss its target by a “wide margin” after it found the department would sell only about 57 per cent of the land needed to reach its goal.

imogen.tew@ft.com

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