Mortgages and housing

Today nearly million adults are buying their homes with the help of building societies. Building societies (including their subsidiaries) have mortgage assets of around £250billion, giving them approximately 20% of the total mortgage balances outstanding in the UK.
 
With property prices being at historically high levels, it is increasingly difficult for people to get on the housing ladder. Even people with good jobs earning above average incomes are finding that they are unable to afford to buy. People who already own a home are also now finding that they are unable to afford to move to anywhere bigger.
 
In recognition of this, building societies and the Government have developed a number of schemes designed to help people buy. We welcome this, and the opportunity it gives for people to own their own home.
 
However, we believe that more could be done to allow more societies to participate in this market. Reductions in the bureaucracy involved in the schemes, the development of standard Section 106 and other planning arrangements across the country and training housing association staff to have a better understanding of the mortgage market could all help more societies become involved, and allow more people to take advantage of shared ownership schemes.
 
And it is important that any future public sector lead schemes are commercially viable for lenders. Recent suggestions for shared ownership schemes that would allow people to buy stakes of as little as 10%, for example, could potentially be very unattractive to lenders in view of the large fixed costs and high potential for default.
 
A key issue for societies when developing products is to ensure that they are affordable in the long term. A major concern is that some schemes allow people into homeownership who may not be able to afford the long term costs of homeownership. Any change in finances (and particularly a significant upward move in interest rates) could potentially see people who have stretched themselves to obtain a mortgage having real financial problems. As a consequence, societies are only willing to lend to those who can afford to borrow, and we believe that financially sustainable homeownership means that many people may, unfortunately, be unable to afford a home of their own.
 
Building societies are also anxious to ensure that the environmental contribution of housing is minimised. As such, they are keen to develop `green' mortgages and other products which would allow people to access funds for improving the environmental performance of their home. However, such products must both respond to a market demand and be commercially viable to generate society involvement.

To find out more on the following specific issues, follow the links below.