Lack of awareness of buying possibilities holding FTBs back: AMI and BSA

Speaking at the inaugural Building Societies Show this week, Stephanie Charman, chief executive of AMI, and Paul Broadhead, head of mortgage and housing policy at the BSA (pictured), said advice has a critical role to play in helping first-time buyers understand that a rejection from one lender does not mean the end of the road.

Charman said many first-time buyers simply do not know where to start, while too many assume there are no options available if they do not fit a mainstream lending model.

She pointed to the perception gap between customers’ expectations of being able to get a mortgage and what is actually possible – referencing a Pepper Money report from 2020 which suggested 70% of potential buyers with adverse credit assumed they would get a decline on a mortgage application, despite the true figure being much lower.

She said this figure emphasised the importance of brokers: “The role advice plays is about much more than simply securing a rate – that is only one small part of the process. Advisers are a trusted source of empathy, guidance and reassurance. They are the people borrowers turn to when something goes wrong or when they do not know what to do next.”

Broadhead agreed, adding that building societies in particular – who hosted today’s event in Coventry – continue to support many borrowers whose needs may fall outside a standard high street credit box.

He said the BSA’s ‘Missing Millions’ research shows that while around 7.2 million first-time buyers might have been expected to purchase over a given period based on long-term averages, only 5 million actually did so, leaving a gap of 2.2 million “missing” first-time buyers.

Broadhead said this is no longer simply a question of raising a deposit. Instead, buyers “are being hit by both the cost of buying [in obtaining a deposit] and the cost of owning, with the end of ultra-low interest rates”, while high rents are making it increasingly difficult to save.

He added that the shortfall is especially acute among younger buyers, with under-25 homeownership falling sharply over the past three decades.

Against that backdrop, both speakers said there needs to be greater awareness that solutions do still exist – particularly through mutual lenders and broker channels, with advisers’ understanding of the offerings available being crucial to creating that awareness in buyers. Broadhead added: “Not every building society can cater for every first-time buyer, but every first-time buyer should be able to find a solution in the sector.”

The pair also touched on the absence of a clear national government-led push to support first-time buyers into homeownership, with Charman noting that while the former Help to Buy scheme was ‘divisive’, it did raise awareness to help aspiring buyers understand what support or lending innovation was available, and said that any future schemes must be both targeted at the right people and have regionally-appropriate price caps applied. Broadhead agreed that government still has a ‘real role to play’ in supporting first-time buyers, but said that boosting housing supply was more important than a return to HTB, adding: “We don’t necessarily need a return to Help to Buy or something similar, and if we do have government intervention then it needs to be really targeted on supply.”

The Building Societies Show took place on Tuesday 21st April at Coventry Building Society Arena, where 36 building societies came together with brokers and senior decision-makers for an event aimed at supporting brokers and delivering better outcomes for clients, supported by headline sponsors Knowledge Bank, Mortgage Brain and One Mortgage System.