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The UK’s housing market remains challenging for first-time buyers, with restrictive lending policies acting as significant barriers to entry. Experts are calling for a relaxation of these rules to better support those attempting to step onto the property ladder for the first time.
Patrick Bamford, head of international business development at Qualis Credit Risk, part of AmTrust International, argues that it’s time to reassess and potentially loosen lending policies to truly help buyers. Bamford highlights that the current support mechanisms, such as stamp duty reform and mortgage guarantee schemes, may only be addressing the surface of deeper issues. These measures, while helpful, do not sufficiently tackle the more substantial obstacles first-time buyers face, particularly in terms of affordability and accessibility.
One of the key issues is the regulation that limits lenders from offering more than 15% of their loans at above 4.5 times the borrower’s income. This cap, designed to prevent risky lending practices in the aftermath of the 2008 financial crisis, is now viewed by many as outdated and too restrictive. The Building Societies Association (BSA) suggests that the Financial Policy Committee (FPC) should review this rule, especially considering the current high mortgage rates. Adjusting this cap could enable more first-time buyers to secure higher loan-to-value (LTV) mortgages, particularly in expensive housing markets.
The BSA report also emphasises the need for a broader range of affordable housing and calls for an independent review to develop a long-term strategy for increasing the number of first-time buyers. This strategy should transcend political agendas to ensure consistent support over decades, rather than fluctuating with each parliamentary term.
Building societies have been at the forefront of innovative lending solutions aimed at supporting first-time buyers. Initiatives such as considering rental payments as part of the mortgage application, offering higher-LTV mortgages, and providing guarantor or joint borrower sole proprietor (JBSP) products are some of the measures these lenders have adopted. Despite these efforts, many within the sector believe they could achieve more if regulatory barriers were eased.
The call to loosen lending policies is not about encouraging reckless borrowing but rather about adapting regulations to current market realities. Fifteen years after the financial crisis, the housing market has transformed significantly. House prices have soared, and supply has struggled to meet demand, making it increasingly difficult for first-time buyers to save for a deposit and meet strict affordability criteria, especially in a high-interest-rate environment.
By easing certain regulations, lenders could offer more flexible mortgage products that cater specifically to the needs of first-time buyers. For instance, adjusting the cap on income multiples for mortgages would allow more people to borrow the necessary amounts to purchase their first homes. Coupled with measures like private mortgage insurance to mitigate risk, these changes could provide a significant boost to those trying to enter the housing market.
In conclusion, revisiting and potentially loosening lending regulations could play a crucial role in helping more first-time buyers achieve their goal of homeownership. With a thoughtful approach to regulatory adjustments, the housing market could become more accessible, ultimately supporting a broader range of potential homeowners and contributing to a healthier, more inclusive market.