In a new white paper, published today with contributions from lenders Nationwide and Kensington, calls on lenders, housebuilders, MPs and regulators to collaborate to find new ways to help first-time buyers obtain mortgages.
The newly formed Industry Panel for Financial Advice seeks to address the three main barriers facing today’s first-time buyers: raising a deposit, affordability pressures and a lack of suitable homes to buy.
The paper follows confirmation of a planned Government review of the mortgage market to help first-time buyers, who are arguably finding it more difficult than ever to get onto the ladder due to a combination of the end of Help to Buy, rapidly rising house prices, the spiralling cost-of-living and economic uncertainty.
IPFA is a new body comprising some of the UK’s leading advisory firms, all of which work in close partnership with Sesame Bankhall Group. IPFA members hope that by shining a light on the issues facing first-time buyers – and by proposing solutions – that the industry, government and regulators will be spurred into action to help solve these problems.
IPFA is urging all key mortgage and property sector stakeholders to work together to solve the problem, and proposing five solutions to help lower barriers to homeownership for first-time buyers:
1. Protect homes for first-time buyers: It is imperative that we protect and increase the number of homes being built through the government’s affordable housing schemes, thereby maintaining choice for homebuyers seeking affordable solutions. A further measure that could be taken to protect the UK’s shared ownership stock is to introduce new laws that limit the proportion of homes that can be ‘staircased’ up to 100% ownership.
2. Launch an industry-wide campaign to raise awareness of Help to Buy alternatives: This includes the promotion of privately backed shared equity schemes, which could build on the visibility and success of Help to Buy, and for those schemes to open their doors to buyers of homes other than new-builds.
3. Create intergenerational mortgages: Linking equity release or retirement interest-only loans with a first-time buyer mortgage, could help those whose parents do not have the savings to gift them a deposit. The rebranding of joint borrower-sole proprietor loans could also be considered to increase their appeal and understanding among families and first-time buyers, combined with a push by mortgage advisers to raise awareness of such loans.
4. Consider new and innovative approaches to high LTV lending: This would help first-time buyers overcome deposit and affordability challenges, such as split-term mortgages. These would, for example, see a 95% LTV loan offered over a 35-year term and the remaining 5% offered as a secured or unsecured loan over a five-year term. It would mean at the end of the first five years, the borrower would be able to remortgage onto a mainstream home loan.
5. Explore the idea of ‘low-start’ mortgages: This could combine capital and interest-only borrowing to help tackle affordability barriers. Such borrowing could be made safer by lending over a 35- year mortgage term and reducing the portion on interest-only as the borrower’s earnings increase.
More detail on the recommended solutions can be found in the white paper. To download a copy click here
Alex Beavis, Proposition Director – Mortgages and Later Life, Sesame Bankhall Group, said: “Getting onto the housing ladder has always been difficult but this generation of first-time buyers is facing perhaps the toughest set of challenges yet. The end of Help to Buy, the spiraling cost of living, rapidly rising house prices and huge economic uncertainty have combined to create the perfect storm for a generation of aspiring homeowners. For a lot of young people out there, the idea of one day owning their own home has become a pipe dream. We need to work together to create positive change.”
Stephanie Charman, Head of Strategic Relationships, Sesame Bankhall Group, added: “The problems first-time buyers face is both complicated and varied, meaning we need fresh thinking. That is why I am so excited by the proposals put forward by the Industry Panel for Financial Advice, which I genuinely believe would make an enormous difference if they were to be adopted. However, to make that a reality, we need the buy-in from all stakeholders, including those from the advice industry, mortgage lenders, the government and regulators – and fast. This is simply too big a problem to tackle by any one party alone.”
