“Significant” changes are needed if the industry is to help first time buyers get on the property ladder without compromising the prospects of future generations of homebuyers.
The report from the Building Societies Association, due to be published in April, suggested that since the financial crisis, the housing market has tilted “too far” in favour of financial stability.
As a result, the cost of this imbalance has been the exclusion of many would-be homebuyers from the housing market.
BSA head of mortgage & housing policy, Paul Broadhead, said: “A properly functioning housing market is dependent on first-time buyers being able to afford their first home.
“While building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.”
The report called for a long-term strategy to make homes more affordable, available and appropriate for those living in them.
It called for changes such as a review of the 15 per cent cap on lending at 4.5 times income, and changing regulation to allow mortgages to be more flexible.
Another proposed change was to review the relative costs and benefits of a stricter regulatory environment versus those of higher homeownership rates to strike the right balance between financial stability and access to home ownership.
Broadhead added 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”.
Challenges
The report also found that the biggest challenge for first-time buyers is affordability, including both affording the cost of buying a home and the cost of owning a home.
The sizeable deposit generally required to get on the property ladder has been a barrier to homeownership "for some time".
However, the report also showed that recent interest rate rises have led to affordability of mortgage repayments being cited as the biggest challenge for would-be first-time buyers.
The BSA stated building societies have a "strong track record" of providing "innovative" solutions to support those taking their first step onto the property ladder and are responsible for around one-third of first-time buyer mortgage completions.
However, the report said “more radical reform is needed to fix our broken housing market”.
tom.dunstan@ft.com
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