The group, working with Sesame Bankhall Group (SBG) and with contributions from the lenders Nationwide and Kensington, said the top three barriers facing today’s first-time buyers are raising a deposit, affordability pressures and a lack of suitable homes to buy.
Alex Beavis, proposition director – mortgages and later life, SBG, said: “Getting onto the housing ladder has always been difficult but this generation of first-time buyers is facing perhaps the toughest set of challenges yet. The end of Help to Buy, the spiraling cost-of-living, rapidly rising house prices and huge economic uncertainty have combined to create the perfect storm for a generation of aspiring homeowners.
“For a lot of young people out there, the idea of one day owning their own home has become a pipe dream. We need to work together to create positive change.”
The IPFA said in a statement that it was “imperative that we protect and increase the number of homes being built through the government’s affordable housing schemes, thereby maintaining choice for home-buyers seeking affordable solutions.”
It called for the establishment of an industry-wide campaign to raise awareness of Help to Buy alternatives, such as privately backed shared-equity schemes, and for those programs to be opened up to include people trying to buy homes other than new-builds.
Another suggestion was to tie equity release or retirement interest-only loans to a first-time buyer mortgage in a multi-generational scheme that could help buyers who can’t rely on the “bank of mom and dad” for their deposit. This would be a sort of rebranding of joint borrower sole proprietor loans combined with a push by mortgage advisers to raise awareness of such loans.
The group asked the industry, government and regulators to work together to consider different approaches to high loan to value (LTV) lending, such as split-term mortgages, as a way to help new buyers clear deposit and affordability hurdles. One example cited would see a 95 percent LTV offered for a 35-year term with the other five percent being a secured or unsecured loan over five years. After the first five years, the borrower would be able to remortgage onto a mainstream home loan, the IPFA suggested.
Finally, the group suggested exploring the idea of ‘low-start’ mortgages that combine capital and interest-only borrowing. Such loans could cover, it said, a 35-year mortgage term and reduce the portion on interest-only as the borrower’s earnings rose over time.
Stephanie Charman (pictured), head of strategic relationships, Sesame Bankhall Group, said that the problems facing first-time buyers were “complicated and varied, meaning we need fresh thinking.”
However, she added “to make that a reality, we need the buy-in from all stakeholders, including those from the advice industry, mortgage lenders, the government and regulators – and fast. This is simply too big a problem to tackle by any one party alone.”
