More help for first time buyers needed now, says leading mortgage lender

The Nationwide wants greater government support for first-time buyers as rising costs delay owning a home.

As one of the UK’s biggest savings and mortgage providers, and the world’s largest building society, the Nationwide has set out measures it claims are needed to make a positive difference, especially for first-time buyers. 

These include:

• Commission an independent review of the first-time buyer market: while raising a deposit and affordability remain the biggest barriers to homeownership for first-time buyers, a wider review is needed to set out and address the significant challenges facing the sector. These include the gap between income growth and house price growth, inadequate supply, the need for planning reforms and the impact of regulations on mortgage lending. A review would help the government produce a sustainable plan to support people hoping to buy a home of their own;
• Reintroduce the Help to Buy ISA: given the success of the previous Help to Buy ISA, Nationwide wants the government to reintroduce it and increase the amount that can be saved per month from £200 to £500. It would also like to see a proportionate increase in the redeemable bonus in line with house prices. To date, Nationwide has opened over 542,000 Help to Buy ISAs.

The society also wants help for savers, too:

• Increase Personal Savings Allowance (PSA): Nationwide is calling on the government to increase the PSA, which was introduced in April 2016 at a time when the interest rate was just 0.50 per cent - more than 10 times lower than today’s 5.25 per cent;
• Back then, based on the average rate paid on a non-ISA savings account (1.11 per cent), a basic-rate payer would have breached the limit with £90,280 savings and a higher-rate payer with £45,140. Today, those figures would be £28,730 and £14,365 respectively (based on today’s higher average non-ISA savings rate of 3.48 per cent);
• As rates have increased, more people are having to pay tax on savings’ interest, while an increasing number of people have become higher rate taxpayers due to income tax thresholds being held at the last Autumn Statement until 2027/28 tax year;
• Nationwide data shows that circa 17 per cent of its savers in non-ISA accounts already have enough to exceed the PSA. And, while ISAs currently remain the most tax-efficient way to save, there is a limit on how much can be put in them.

Rachael Sinclair, director of mortgages and financial wellbeing for Nationwide, says: ‘‘Homeownership for many first-time buyers is a huge challenge. Reintroducing the Help to Buy ISA would make a big difference to building a deposit, while a review of the first-time buyer market would help determine the right solutions for helping people get a home of their own. 

“For savers, the Personal Savings Allowance feels out of sync with interest rates and, if it is not increased, many more will be forced into paying tax at a time we need as much encouragement as possible to save.”