Stepping up and stepping in to support first-time buyers

With the General Election approaching in just a few months, the recent Spring Budget statement was unsurprisingly focused on delivering policy decisions with the potential to crowd please.

The most notable announcement was a further 2p reduction in national insurance, matching the previous cut made in the Autumn Statement.

From April, this will decrease the national insurance rate to 8% for employees and 6% for self-employed individuals, putting some very welcome money into the pockets of the public. Chancellor Jeremy Hunt also unveiled plans to develop a UK ISA.

Which, in addition to the existing ISA allowance, will give people an extra tax-free allowance of £5,000 to invest in UK assets.

The other announcements, which also seem to have been well received, included an adjustment to child benefit, the abolishment of non-dom tax status, and the introduction of a new tax on vaping.

Disappointingly though, there wasn’t much in the announcement regarding the house building commitment, the current strain on high quality new housing, or steps to support the ever-growing market of aspiring homeowners.

The only announced changes in the homeownership market included the abolishment of Furnished Holiday Let (FHL) tax rules and the end of the tax relief available to landlords’ renting properties for short stays.

Along with the decrease of capital gains tax rates from 28% to 24%, and the removal of stamp duty relief for people buying multiple residential properties.

Nothing on affordable housing, first-time buyer support, or social housing. Which, given the challenges faced by renters and homeowners in the current market, is a disappointment and a missed opportunity.

Rightmove suggests that an increasing number of renters seem to be reaching their ‘ceiling’ in terms of affordability.

In Q4 of 2023, the average advertised rents nationwide rose by 9.2% from the previous year, now standing at £1,280 per month according to Rightmove.

This marks the slowest growth rate since 2021, and while this might seem positive for renters, it reflects the financial strain many are facing.

At the end of 2023, around 23% of properties needed a reduction in advertised rent, compared with 16% in Q4 2022.

The first-time buyers of tomorrow are the renters of today, and their ability to save for a deposit is being squeezed too almost nothing. Which, combined with higher mortgage rates, makes for a challenging situation.

At Newcastle Building Society, we believe that everyone should have a fair chance at becoming a homeowner, regardless of the economic state.

That’s why we’ve collaborated with our broker partners to develop practical solutions for first-time buyers.

From enhancements to our existing propositions to supporting industry schemes. We listen to broker and market feedback to identify ways we can bridge the gaps that prevent borrowers from getting on or moving up the property ladder.

Our Shared Ownership range has been expanded to offer options for remortgaging and staircasing, and our Joint Mortgage Sole Proprietor (JMSP) proposition continues to be a popular option for a range of borrowers challenged by affordability.

We support purchases of new build houses up to 90% loan-to-value (LTV) and continue to support homeownership schemes like First Homes and Deposit Unlock.

First Homes helps first-time buyers by offering a minimum discount of 30% against the market value on new-build property prices. In areas where house prices are significantly higher than average wages, these discounts can reach 40% or 50% to ensure homes are affordable for residents.

We are also one of a handful of lenders still offering 95% LTV deals through the Deposit Unlock scheme, a vital lifeline for first-time buyers across the UK.

We are doing what we can to support first-time buyers, and we know it makes a big difference to the borrowers we help.

Nevertheless, the uncomfortable truth is that the Government must urgently address the ongoing housing crisis.

Building more homes may be one step in the right direction, but a more nuanced approach to the various tenures that make up the market is desperately needed.

Regardless of the outcome of the general election, housing must be made a long-term priority across all parties.

Michael Conville, chief customer officer at Newcastle Building Society