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First-time Buyer

First-time buyer numbers lag as government home ownership schemes ‘miss the mark’

Paloma Kubiak
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Paloma Kubiak

Between 2007 and 2015, the number of first-time buyers in the UK was two million less than expected, based on previous trends, a mortgage trade body has warned.

The Intermediary Mortgage Lenders Association (IMLA) said that ‘Own Your Own Home’ schemes are “missing the mark” as first-time buyer numbers remain 2.2 million behind where they should be given demographic trends.

In its new report, it said the government’s various home ownership schemes such as the Help to Buy ISA and the Starter Homes Scheme are yet to have the desired upward effect as having a large enough deposit remains one of the biggest barriers for first-time buyers

So far, 90,000 new home sales have been made under the Help to Buy equity loan, NewBuy and FirstBuy schemes and a further 74,000 mortgages have been completed with the support of the Help to Buy mortgage guarantee scheme.

But IMLA said the government has failed to reverse the decline in home ownership as between 2010 and 2013 (the latest year for which data is available) the number of owner-occupied homes in the UK fell by 270,000.

While this decline may now be stalling – the latest English Housing Survey showed no change in owner occupation rates between 2013-14 and 2014-15 – but there is yet to be any increase in homeownership levels.

IMLA’s analysis of data from the Building Societies Association (BSA) suggests more people worry about accessing a mortgage than affording one.

In recent research, 39% of aspiring first-time buyers cited access to a large enough mortgage as one of the main barriers they faced to buying a home – higher than the 34% citing the affordability of mortgage payments.

This implies that many first-timers are unable to borrow a sum they consider to be affordable, said IMLA, which could suggest over-regulation of the market.

Overall, raising a deposit was identified as the biggest barrier to homeownership, cited by 61% of aspiring first-time buyers.

The IMLA said the new stamp duty surcharge will actually hit renters who may be saving up to buy a property as the demand for rental accommodation increases and landlords are able to up their prices.

It added that capital requirement rules around high loan-to-value mortgages should be relaxed to allow first-timers a chance to get on the property ladder.

‘Own goal by the government’

Peter Williams, executive director for IMLA, said:Current policy is still missing the mark and failing in its objective of maintaining home ownership levels. This is partly because saving for a deposit and accessing high loan-to-value (LTV) mortgages remain ongoing challenges for first-time buyers. Mortgage repayments are cheaper than ever but many first-timers simply don’t qualify for a mortgage as they can’t stump up the starting sum.

“Government has moved from an overall focus on supply regardless of tenure to a new policy centred on supply built around home ownership with the risk of making a bad situation worse.

“The latest move to control the rental market by taxing landlords is an own-goal by the Government.  It is likely these costs will simply be passed onto tenants as landlords look for other ways to maintain their profits, making the challenge of saving for a deposit an even harder struggle and it will reduce the flow of investment into new homes for rent.”

He added that restoring access to high LTV loans for first-time buyers who can afford them has been an important part of the post-recession recovery, and helped avoid an even wider chasm between actual and expected first-time buyer numbers.

“It is vital this part of the market does not diminish after the end of this year, pushing many aspiring buyers back to square one.”