"This isn’t only about bricks and mortar either; it's about the stability, community, and sense of belonging that come with owning one's home."
Home ownership is an aspiration for millions of people across the UK, but the housing market remains a notoriously challenging environment for first-time buyers. From issues such as high property prices and volatile short-term interest rates, to limited housing stock and stamp duty, home ownership can be an unaffordable prospect. And despite our current government having over a decade to make significant change, it seems very little progress has been made. We’ve also seen dozens of housing ministers in and out the door within that time. Now is the time for action.
First-time buyers in crisis
First-time buyers are facing a crisis. Our recent study found that almost two-thirds have faced difficulties when securing a large enough mortgage to buy a home, and over two-thirds say this is due to their income levels. This has societal knock-on effects, with 50% of aspiring first-time buyers looking to delay other life events, such as marriage or starting a family, in order to save money towards buying a home. For others, the painful experience is putting off over two-fifths (42%) from buying a home altogether. The mortgage market as it stands is not just an obstacle - it's a life-altering barrier.
This isn’t only about bricks and mortar either; it's about the stability, community, and sense of belonging that come with owning one's home. The psychological impact is profound—when the security of a permanent home is unattainable, the effects ripple through wider societal health, productivity, and cohesion.
The government has failed first-time buyers
The government did try to address and recognise some of these challenges, but these were only temporary and half-hearted measures - the now-defunct Help to Buy scheme and the Lifetime ISA. The recent consideration of a 99% mortgage guarantee scheme, which never really saw the light of day, is also testament to a lacklustre approach.
While critics were quick to dismiss the idea of 99% mortgages, the issue lay in its misalignment with a mortgage market fixated on short-term, fixed-rate products that inevitably revert to higher standard variable rates. If used correctly, this scheme had the potential to unlock the housing market for first-time buyers. It’s of course essential that certain risks, like negative equity, are mitigated, but this could have been achieved by combining the scheme with long-term fixed rate mortgages (LTFRMs). The key is to remove market risk from borrowers, which traditional mortgage products cannot deliver.
After scrapping the scheme, the Spring Budget’s overall silence around first-time buyers was a telling sign that the government has effectively given up on providing support to this cohort before the next general election.
Revamping the mortgage market
Now that the government has shunned responsibility, there is a need for the industry to come together, collaborate, and fill the gap left behind. By diversifying the mortgage products on offer and moving away from our reliance on short-term fixations, there remains an opportunity for the industry to innovate and address these concerns through LTFRMs which not only provide stability through a fixed rate but also flexibility with short early repayment charges.
The government should facilitate home ownership, not hinder it, and there are several ways to do this. For example, we need to consider home ownership schemes that reflect the realities of modern day struggles to get onto the housing ladder. We need housing strategies that prioritise the construction of affordable homes, not just in quantity but in the quality and sustainability that will serve future generations. We need regulation updated to reflect current market conditions, such as removing loan-to-income caps on LTFRMs. We need a serious revamp of the current system, not a piecemeal approach.
Imagine a future where buyers are empowered with options that reflect their long-term interests. Where the mortgage market is instead characterised by innovation, competition, stability, and fairness. We wish to see a system where long-term fixed rate mortgages are the norm, providing a stable foundation for financial planning, peace of mind, and life decisions. We would love to see a government that not only supports this vision, but champions it through incentives for lenders and practical support for buyers.
Ultimately, many are now fed up with empty promises. The time for temporary change is over. We need a government that takes bold and decisive action to dismantle the barriers facing first-time buyers. In the interim, the industry will fill this gap, but we need change in the housing market, and we need it now.
