The roadblocks facing potential first-time home buyers in the UK are increasing, and the latest Mortgage Market Review proposals from the regulator could make it even worse.
A report published by insurer Genworth Financial entitled “Financial Barriers to Home Ownership" suggests that the entire generation could be disenfranchised if access to loan financing for first-time homebuyers remains constrained to the current degree, which could lead to significant social problems in the UK.
The study also showed that the number of younger first-time home buyers has declined significantly. About 26 percent of home buyers aged 20 to 24 years old in 1997 could afford to acquire their own home, but that number has dropped to 18 percent today.
Angel Mas, European head of mortgage insurance at Genworth, said the proposed restrictions of the Financial Services Authority (FSA) interest-only mortgages, as well as the loan-to-value caps could exacerbate the problem, particularly among young home buyers whose parents are unable to lend them the 25 percent down payment needed.
“The decline in the availability of high LTV mortgages is substantially reducing the ability of younger working households that do not have access to parental help to become FTBs.”
“As a result it is requiring them to remain in the private rented sector for many more years than their contemporaries who have access to parental help.”
“The government needs to engage with the relevant regulatory bodies so that a framework emerges that does not unnecessarily inhibit the return of 90 percent to 100 percent mortgages that are subject to appropriate household risk assessment,” he added.
“The deposit barrier creates a new bar to social mobility. This needs to be addressed.”