Rachael Sinclair,
Director of mortgages and financial wellbeing, Nationwide Building Society
Getting onto the property ladder remains as tough as ever, with our latest research1 showing that one in five prospective homeowners don’t think they’ll be able to buy until their forties.
Challenges
High house prices continue to prevent many from accessing a mortgage, with the main two hurdles facing prospective homeowners being the raising of a deposit and, perhaps more importantly, affordability.
According to our poll1 of 1,000 aspiring homeowners, nearly half (49%) have delayed their homebuying plans due to affordability concerns.
Collaboration remains a crucial element if we are to resolve the first-time buyer conundrum
Based on Nationwide’s House Price Index, someone raising a 10% deposit on a typical first-time buyer home would require 52% of the average annual gross income, around £43,000.
While affordability impacts everyone, there remains considerable variation in affordability across the country, with pressures particularly acute in London and the south of England, while Scotland and the North continue to be the most affordable regions.
Keys to success
As part of Nationwide’s plan to deliver fairer banking, we have identified a number of critical measures the government and policymakers should introduce to enable more people to buy a home of their own.
Propositions offering enhanced support in a measured way — like Helping Hand — should be exempt from imposed limits
This includes the commission of an independent review of the first-time buyer market, which we believe will identify the significant challenges facing the sector.
For it to be even remotely successful, it needs to consider a range of impacting factors, such as the gap between income growth and house price growth, inadequate supply, the need for planning reforms and the impact of regulation on mortgage lending.
Lending a Helping Hand
It’s that last point where we feel a real impact can be made, especially with the affordability challenge.
Back in 2021, we launched our Helping Hand proposition to play our part in tackling that affordability challenge. It enables first-time buyers to borrow up to 5.5 times their salary on five-year and 10-year fixed-rate mortgages up to a maximum of 95% loan-to-value.
One in five prospective homeowners don’t think they’ll be able to buy until their forties
It means a first-time buyer with a joint income of £50,000, a 5% deposit and no other costs could borrow up to £275,000 with a Helping Hand boost, compared to just £225,000 without one.
We’ve seen exceptionally strong demand for the product because the lending boost it offers comes at a time when the house price to earnings ratio for a first-time buyer continues to rise.
Over the last 10 years, it has gone from 4.8 (Q1 2014) to 5.2 (Q1 2024), while the average first-time buyer house price has gone from £153,490 in Q1 2014 to £223,554 a decade later.
In fact, we’ve helped more than 30,000 first-time buyers by giving them a Helping Hand. However, while it has been a successful start, we know we can do more and, as a mutual, we want to do more because helping people into a home of their own remains core to our purpose.
While affordability impacts everyone, there remains considerable variation in affordability across the country
However, current regulations mean mortgage lending at more than 4.5 times a borrower’s income is restricted to 15% of a mortgage provider’s total lending. That is why we would like to see the rules adjusted to enable more lending at higher loan-to-income levels.
Given the strong demand that we have seen for Helping Hand, we are now having to manage our lending relative to that limit as a result.
As a responsible lender, we remain wholeheartedly supportive of the need for prudential controls.
However, we believe that propositions offering enhanced support for first-time buyers in a measured way — like Helping Hand — should be exempt from such imposed limits.
Nearly half (49%) of aspiring homeowners have delayed their homebuying plans due to affordability concerns
This will help pave the way for greater support of first-time buyers, particularly in areas where the gap between house prices and average earnings has widened.
Collaboration, therefore, remains a crucial element to all of this if we are to resolve the first-time buyer conundrum. Without it, we risk the wheels spinning on the homeownership crisis indefinitely.
1 The research was conducted by Censuswide with 1,008 prospective FTBs (those looking to buy in next five years) between 15.03.2024 – 19.03.2024. Censuswide abide by and employ members of the Market Research Society, which is based on the ESOMAR principles, and are members of The British Polling Council.
