'Radical changes' required to support first-time buyers: BSA

A new report from the Building Societies Association (BSA) says that "significant changes are required" to help prospective first-time buyers get on to the property ladder in the current housing market.

The report looks at the compromise between financial stability and growing the number of first-time buyers and suggests that since the financial crisis this has tilted too far in favour of financial stability.

Some of the changes recommended include:

• Reviewing 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 enabling access to home ownership.
• 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.
• Reviewing the 15% cap on lending at 4.5 times income, including whether it should specifically support first-time buyers.

Raising a deposit to get on the property ladder has been a barrier to homeownership for some time. However, recent BSA research found that the recent interest rate rises have now led to affordability of mortgage repayments being cited as the biggest challenge for would-be first-time buyers.

"More radical reform" is now needed to fix the housing market, the BSA says.

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.”