Good news for first-time buyers, but Britain still needs more houses
UK first-time buyers are set to get more support for getting on the property ladder through new lending rules, but these measures only address one half of the UK’s housing affordability crisis.
On Monday 15 December, the Financial Conduct Authority proposed new plans to help first-time buyers get the mortgages they need to get on the housing ladder. These include more flexible approaches to lending that account for rental payment histories and other factors.
The proposed mortgage market reforms also included helping homeowners unlock housing wealth for a more comfortable later life.
While this is welcome news for first-time buyers, who find it inordinately more expensive to buy their first home than the generation before them, the key problem of available housing remains a major obstacle.
This is according to Zara Bray, mortgage distribution director at Quilter Financial Planning, who said the benefits of these reforms would be muted by the lack of housing supply in the market.
“The FCA’s roadmap is ambitious and welcome but can only work in parallel with a government committed to overcoming the UK’s deep-rooted housing challenges,” Bray said.
“Even with more flexible lending approaches, limited housing stock will continue to be a major brake on homeownership.”
“Without sustained supply-side action, the benefits of regulatory innovation will be constrained, particularly for first-time buyers facing intense competition for too few properties,” she said.
She did note, however, that the FCA’s proposed reform of lending rules would provide a boon to first-time buyers who have demonstrated the ability to make mortgage payments through a long-term rental history but remain ineligible for the mortgage they need to get on the property ladder.
“These changes could make a real difference for people who have long demonstrated affordability through high rents but remain shut out of the mortgage market,” Bray said.
Additionally, as first-time buyers continue to get on the property ladder later in life and carry more debt into their old age due to higher house prices, Bray expects that demand for later-in-life lending will grow sharply.
“A market that is already limited in size and scope will need to expand and deliver clearer communication if it is to meet that demand,” she said.
She added that the renewed focus on advice in the FCA’s roadmap is an important point, as this will help people understand choices, including lifetime mortgages, downsizing, and the long-term implications of supporting retirement through housing wealth.
“Ultimately, the FCA has laid the foundations for a more flexible and modern mortgage market, but the success of this roadmap will depend on collaborative action across the industry and government,” Bray said.
“Better-quality advice, improved customer support, and meaningful progress on housing supply must go hand in hand if we are to widen access to homeownership in a way that is both safe and sustainable.”
