On inter-generational mortgages, Richard Rowntree, managing director of UK Mortgages at Bank of Ireland, said that increases in standard variable rate (SVR) following the November base bank rate (BBR) rise to 0.5% from 0.25%, will make mortgages even more inaccessible to aspiring homeowners.
“Because we now need to stress at 3% above SVR, with base rate SVRs increasing – that’s likely to increase even further and exacerbate this problem. So we’re likely to see another 5-10% of those who would’ve been able to pass our affordability stress tests now failing because we’re having to link [affordability] to a higher SVR,” Rowntree said.
“And that’s all responsible and that’s all great, but it doesn’t get away from the fact that when you look at the number of those who own their own homes in that bracket of 20-29, it has reduced significantly,” he continued.
The statement comes in the context of stagnating income levels, leaping house prices, and rising consumer dissatisfaction with affordability.
Earlier this year, over 180,000 people signed a petition demanding that parliament debate whether rental payments should be considered as a measure of affordability.
“For the person on the street who’s actually sitting there thinking ‘I’m paying more in rent than I would do on a pay-rate for a mortgage, and that’s been the case since 2008 – I’ve been paying off my landlord’s mortgage, and that’s not fair’, I understand that, I get that,” said Rowntree.
However, Rowntree said that renters simply aren’t aware of the stress tests imposed by affordability regulations.
“The gap [of stress testing] is what’s not seen, and not necessarily explained by brokers and lenders alike,” he said.
And the responsibility is on both the public and private sectors to close that gap in awareness and affordability, Rowntree said.
“The government can’t solve this on its own – we certainly can’t solve it on our own from a private perspective.”
“Something else needs to happen, tenure needs to change, or we need some other mechanisms to support those who want to get their feet on the housing ladder earlier,” he added.