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YBS releases report with suggestions to ‘fix’ UK housing market

YBS releases report with suggestions to ‘fix’ UK housing market
Shekina Tuahene
Written By:
Posted:
October 11, 2024
Updated:
October 11, 2024

Yorkshire Building Society (YBS) has called for a joined-up approach to improving the UK housing market in a new paper.

The mutual launched its Home Improvements – Building an Integrated Strategy for UK Housing in Parliament yesterday, with recommendations for “fixing what is wrong with the UK mortgage and housing markets, with particular focus on the plight of those looking to buy their first home”. 

YBS’ paper said the UK housing market was “at a crossroads” and the “dream of homeownership feels out of reach and seems to recede further with every passing day”. 

It said previous policies to address the problems with UK housing had been “sporadic, poorly targeted, subject to sudden and unexpected change, and have frequently been blamed for exacerbating issues”. 

The mutual said: “It is time for joined-up thinking and bold action.” 

YBS suggested appointing a Housing Tsar to put housing at the top of the political agenda and an independent body to oversee the progress of housebuilding. It also called for “holistic” planning reform. 

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A later start for first-time buyers 

YBS said first-time buyers were being “forced to wait longer than ever to get on the housing ladder, need larger deposits and often require financial support from family members”. 

It said little had been done to alleviate rising house prices and noted that although they had started to fall, interest rates were still relatively high. 

It recommended setting up a National Housing Plan to help first-time buyers and encourage people back into the housing market, such as older homeowners who may need to downsize. YBS said this could be resolved by addressing the problems around deposit-building and mortgage affordability. 

YBS said a new government scheme to help first-time buyers should be introduced, but said the now discontinued Help to Buy scheme was “widely recognised as having several flaws”. 

YBS said Help to Buy was “poorly targeted and therefore in many cases didn’t reach less affluent buyers it was created to help.

“This exacerbated the demand for larger homes and therefore encouraged housebuilders to build bigger houses, rather than the smaller properties needed by first-time buyers with modest means and most in need of help”.

Help to Buy contributed to house price inflation, YBS said, and supported higher-loan-to-value (LTV) lending. Without the scheme, YBS said lenders had been left to “shoulder that burden” and some had withdrawn lending over 90% LTV. 

It said first-time buyers should have access to all types of properties, not just new build, and there should be support for energy-efficient retrofitting. 

 

Reviewing mortgage stress testing 

YBS suggested a review of stress testing rules, saying while they were “essential to ensuring mortgage providers continue to lend responsibly going forwards”, stress testing “should be reviewed to ensure they remain relevant and prudent”. 

The mutual said: “A more sophisticated and sustainable method could be applied to setting them.” 

The report also recommended more stamp duty incentives to encourage downsizing to free up homes and help people who may need to move to reduce mortgage costs. 

 

Rewarding good landlords 

YBS said: “Government policy in relation to private landlords and the buy-to-let market has been a patchwork of measures often targeted at a single issue, rather than being designed in the round.

“The result has been to burden landlords with higher costs and more administration, which has neither been helpful to the UK’s housing infrastructure nor entirely beneficial to private tenants.” 

The mutual said there was an opportunity to re-incentivise landlords by bringing back mortgage interest tax relief and other benefits for those demonstrating responsible practices, which it said would help to protect renters. 

“The tax relief should be made available to landlords whose property meets certain standards, including those for health and safety and energy efficiency.

“Such a policy would reduce costs for landlords and so reduce the upward pressure on rents. It would also reward responsible landlords who contribute to the regeneration and renewal of existing housing stock, and create an incentive for improved energy efficiency,” YBS said. 

Susan Allen, CEO of YBS, said: “What we’re seeking to do in our policy paper, having listened to the issues first-time buyers and other borrowers have said they’re experiencing, is highlight the root causes, and identify the strategic changes that are needed to unlock more possibilities for consumers. 

“We believe we have a responsibility to act as an industry change-maker by proposing solutions and developing our own innovative products and services to make things easier.” 

Mike Reader MP added: “As we have seen via the actions of the new Labour government since the general election – including the King’s Speech – housing policy is a high priority, and it’s important that their approach to housing has a long-term focus, which will require cross-industry effort by all concerned. 

“It was fantastic seeing Yorkshire Building Society helping to lead that charge with this event designed to get leading thinkers around the table to consider solutions, and I welcome further proactive steps like this in the future.”