Increasing housing supply by building new homes and offering first-time buyers mortgages with high loan-to-values are often cited as solutions to increasing home ownership.
But new-builds are not necessarily cheaper than pre-owned properties. The average price of a new-build was £388,789 in January, up 17 per cent year on year, according to the government's UK house price index.
In comparison, the average price of an existing resold property was £276,194, down 1.8 per cent year on year.
Indeed, the Office for National Statistics found newly built dwellings were, on average, less affordable than existing properties across England and Wales in 2023.
Using a threshold of five years of income as a broad indicator of affordability, only existing dwellings in the North East cost less than five times earnings last year, according to the ONS.
It also found that full-time employees in England could expect to spend around 8.3 times their annual earnings buying a home.
In February, the then government was reportedly looking to introduce a 99 per cent LTV mortgage scheme as part of the Spring Budget.
But with loan-to-income ratios usually capped at 4.49 times income, even a rare 100 per cent LTV mortgage would not be an applicable solution for many aspiring first-time buyers.
“The government was talking about 99 per cent LTV mortgages, which didn't ultimately come to anything,” says Yorkshire Building Society’s director of mortgages, Ben Merritt. “So we stepped in with a solution, but we're not going to be able to service the whole market on our own.
“What we've called for is two things. One is cross collaboration across new-build houses, lenders, regulators and consumer groups to try and work out what are the right options, and what are the downstream impacts of certain schemes.
“And then we want a variation of a Help to Buy scheme that isn't specifically new-build, which would include second-hand homes as well and that helps first-time buyers with that deposit; so some kind of government support to help them to buy a new-build or second home."
Supply and demand
He explains the problem the UK had with Help to Buy was that a lot of government incentive was concentrated into quite a small market, because with new-builds the market was only seeing approximately 200,000 homes a year.
But Merritt says if there was government support across the entire industry, Britons would then have access to a much greater supply.
He explains: "The impact on house prices would be less severe than what we saw with Help to Buy, which inflated prices, as we know, and that was because you had a small amount of supply and a huge amount of demand.”
“Everyone's got their views on Help to Buy, but it certainly did improve access for first-time buyers on both a deposit and affordability perspective,” says Nationwide’s director of home, Henry Jordan.
An important component of the scheme, he adds, was that it was outside the LTI flow limit, which restricts the number of mortgages extended at LTI ratios of 4.5 or more to 15 per cent of a lender’s new residential mortgage lending.
