Strategies for supporting UK first-time buyers

Peter O’Conner, Chief Executive Officer, Target Group (Chair)

Jen Lloyd, Head of Mortgage Products and Proposition, Skipton Building Society

Jess Rushton, Head of Business Development – Smart Money People

Tom Wrigglesworth, External Affairs Manager, Leeds Building Society

Katie Pender, Managing Director – Target Group

The session opened with a reference to the recent BSA First-time Buyer Report which highlighted that becoming a first-time buyer (FTB) is possibly the most expensive it has been over the last 70 years. 

Following a quick quiz, the audience learnt that contrary to popular belief, sacrificing a daily posh coffee and avocados was not the solution - it would take 17 years of abstinence to save a typical £22k deposit!

Affordability is the biggest issue for today’s FTBs as the house price-to-earnings ratio continues to widen. Since 1982 house prices have increased 16 fold, with earnings increasing 7 fold. 

The panel discussed potential solutions to some of the issues impacting FTBs. 

How can we stop the decline in owner-occupier housing?

  • Working with government on a long-term housing plan to increase the number of new homes

  • Education for FTBs, giving them knowledge of what is available to them, including shared ownership and high loan-to-value mortgages

  • 15% FTBs have adverse credit ratings impacting their ability to get a mortgage, but often this is as a result of a very small anomaly – help them understand how to check and rectify issues on their credit rating

What are the structural barriers for FTBs?

  • Savings balances too low - £6k on average (SMP)

  • Availability of affordable housing – recognising that FTBs should still be able to ‘live a little’ 

  • The amount of savings required for the deposit and other costs can be overwhelming / too far out or reach

  • The confluence of higher interest rates and higher deposits required as house prices continue to rise

  • Now 100% of annual income is required as a deposit, compared to just 25% in 1980

What can Building Societies and Credit Unions do to support FTBs?

  • Niche problems need niche solutions – some lenders have responded, for example:

    • Skipton BS 100% loan-to-value mortgage

    • Leeds BS withdrawal from holiday lets in specific areas, in partnership with local authorities

    • Leeds BS Experian Boost for those with thin credit files

  • Consider how to use inter-generational wealth

  • Review cases on an individual basis – taking time to ensure personalised lending decisions

  • Business Development Managers’ relationship with brokers is important – brokers are the building societies link to customers and can help identify solutions to borrowers’ needs

  • Use Open Banking to improve credit scores 

  • Lifetime ISAs can help to boost savings for the deposit and other costs

  • Become the trusted source for advice and support, currently many FTBs get this from TikTok Finfluencers

  • Building societies could collaborate more to support would-be FTBs, in a way similar to UK Savings Week

  • Media have a role and can cause panic particularly if mis-informed – need to take time to educate/support journalists so they can provide trusted guidance

What could be in the manifesto for the next Government?

  • Supporting the housing and FTB market has been prioritised by all parties 

  • Need a clear long-term housing plan and strategy

  • Strategy should be beyond building new – how do we bring derelict houses into the mix and align them with green targets

  • This will require a long-term Housing Minister, and the role should be elevated to Cabinet. 

  • The government homebuyer information page should be simplified

  • Need to recognise that providing solutions which support demand (such as Help-to-Buy) without supply, kicks the can down the road and leaves tomorrow’s FTBs in a worse position

  • FTBs need stepping stones to affordable homes e.g. shared ownership / support to single buyers

  • LISA have not kept up to date which has diminished the value, this needs reviewing 

  • Incentives for people to downsize are needed – stamp duty is a barrier and the properties they want are not are not available

  • Better financial education in schools – we need to get over the Britishness of not talking about money!

  • Set ‘Targets with Teeth’. Planning system is a barrier and needs political leadership on planning reform to create a better balance between yimby and nimby (nimby’s currently have too much of the balance)

What more could the Regulator do?

  • We need to find ways to simplify the information provided to FTBs e.g. mortgage offers are around 28 pages

  • Review the 15% loan-to-income cap – there are other controls in place, including lenders being required to test affordability so no longer necessary to have this constraining lending

  • Regulation needs to get a better balance between customer and conduct

What can Open Banking and AI offer?

Find opportunities to leverage technology to make the FTB experience better – e.g. property searches