The association says significant changes in regulation are required to help those struggling to afford a mortgage to get on the property ladder.
The report’s findings, due to be published in April, will suggest that, since the financial crisis, the balance between maintaining financial stability and growing the number of first-time buyers has tilted too far in favour of stability. The imbalance, it says, has led to the exclusion of many would-be homebuyers from the market.
As part of a long-term strategy to make homes more affordable and available, the BSA is calling for a review of the 15 per cent cap on the volume of lending that banks and building societies can extend to borrowers using a four-and-a-half times income multiple.
In the report, which has the support of major societies Nationwide, Coventry, Leeds, Skipton and Yorkshire, the association notes that the cap on high-income lending may be less relevant in a higher-mortgage-rate environment.
However, it wants an immediate review to assess whether it would be better to target mortgages above the cap solely at first-time buyers.
First-time buyers should also be able to take a mortgage out on a part-repayment, part-interest-only basis, says the BSA, giving them the flexibility to shift between the options over the life of the loan. It also wants regulators to review the current constraints for borrowers heading towards and into retirement, allowing them to borrow flexibly beyond retirement age.
Furthermore, the BSA wants a review of the relative costs and benefits of a stricter regulatory environment versus those of higher homeownership rates. It says that, by striking the right balance between financial stability and enabling access to homeownership, there would be no need for short-term government-backed mortgage schemes to stimulate the market.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “A properly functioning housing market is dependent on first-time buyers being able to afford their first home. Whilst building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.
“Many things can be done to fix the broken housing market. But we need to ensure that changes to regulations and support schemes not only help today’s first-time buyers, but don’t fail future generations.”
