First time buyers back tougher mortgage rules

75% of first time buyers believe banks must lend responsibly despite the fact it will stop some people getting a mortgage, report Shelter.

Related topics:  Mortgages
Millie Dyson
26th May 2011
Mortgages
The YouGov poll reveals just how much the majority of people wanting to get their first step on the housing ladder support stronger mortgage regulation. Shelter is currently calling on the Financial Services Authority to implement reforms set out in the Mortgage Market Review and for the government to support this.

The survey also found that 79 per cent of first time buyers think banks and building societies lent irresponsibly before the credit crunch and over a third (38 per cent) do not think they can be trusted to lend responsibly in the future.

The spiralling cost of housing means that many first time buyers would have to overstretch to get a foot on the ladder.

But survey respondents did not agree that easy credit was the answer to overpriced housing with more than eight out of ten first time buyers (84 per cent) believing that banks should only offer mortgages to borrowers who can prove they can afford it.

Other findings from the survey, which provides a unique insight into first time buyer attitudes towards mortgage lending, include:

- 83 per cent strongly agreed that lenders should check a borrower's income before giving them a loan

- 75 per cent believe banks should make sure borrowers have enough cash to pay the mortgage once other costs have been taken into account

- 53 per cent of first time buyers agree the high cost of homes, not the availability of credit (41 per cent), is the biggest barrier to them getting on the ladder

- Nearly a third (28 per cent) said they had been offered a bigger mortgage than they had asked for, or knew someone that had.

Campbell Robb, chief executive of Shelter said:

"This survey shows people really want simple, common sense rules in place to ensure people borrow money responsibly. What is most striking is the level of support amongst first time buyers who clearly want greater protection and are well aware it might limit their chances of getting mortgage credit in the future.

"So far the voice of the consumer has been completely drowned out by the mortgage industry, when in reality it is this very group who most recognise the need for stability in the market. We must not let banks go back to the old ways of irresponsible and reckless lending."

Currently the housing minister is calling on the Financial Services Authority to delay the introduction of much needed new rules to help protect people from irresponsible lending. But the survey shows 65 per cent of first time buyers think politicians need to be doing more to prevent irresponsible lending.

Mr Robb continued:

"It's high time the housing minister stopped bowing to the banking lobby and ignoring the advice of economic experts and consumers who have sent clear signals that mortgage lenders need to clean their act up."

"We are set for some really tough times ahead as repossessions are already starting to rise and more and more people struggle under the combined pressures of VAT rises, increasing unemployment and sky high living costs.

"If we compound this by allowing irresponsible lending to make a return to the market, it will spell disaster for our fragile housing market and will undoubtedly result in many more people across the country needlessly losing their homes."

Matt Griffith, from First time buyer group Priced Out said:

"First time buyers have borne the brunt of loose mortgage lending in the past. Loose lending has driven up house prices to sky high levels and first time buyers have too often been expected to take unacceptably high financial risks when trying to get on the ladder.

"First time buyers know that getting on the housing ladder is hard work, and we are prepared to work and save to get there. What we don't need is a housing market that behaves like a casino.

"We just want to buy a home to live in, not a life of risky debt. We expect the government to protect us from irresponsible lending and make sure our interests are put before those of the mortgage lobby."

Phil Cliff, Director of Santander Mortgages, said:

"As one of the UK's largest lenders we recognise the importance of supporting the First Time Buyer market, especially during the current economic climate, which is why we've launched one of the lowest rate 90 per cent products on the market. 

"Our market leading two year fix at 5.29 per cent offers a great rate with a low fee and will surely provide a welcome boost to the FTB market.

"With one in four first time buyers relying on their savings to get on the property ladder, it's even more important that they get their money to work hard for them.

"The Santander First Home Saver account already offers a market leading savings rate - now we're honouring our commitment to our customers and rewarding their loyalty with a market leading mortgage rate, the second time we have offered an exclusive mortgage rate to First Home Savers.

"We're keen to reward these savers and feel this product with its highly competitive 5.29 per cent rate and low fee certainly does that."

CML director general, Michael Coogan, said:

"The question is not whether to implement changes to mortgage regulation, but when and how. Given the continuing subdued nature of the mortgage market and the tight criteria still prevalent, there is no rush and it is far better to ensure that UK and European regulatory changes are coherent and implemented in tandem.

"Far from bowing to the banking lobby, as Shelter puts it, a measured approach from regulators and government is simply good sense in a market where there are as many risks from too much regulation as from too little."
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