Nationwide Building Society begs for a government bailout for first time buyers and savers.
20 Nov 2023
NATIONWIDE CALLS FOR MORE SUPPORT FOR FIRST-TIME BUYERS AND SAVERS
- Nationwide calls for measures to help first-time buyers and savers ahead of Autumn Statement
- Key asks include market-wide review, reintroduction of Help to Buy ISA and increase in Personal Savings Allowance threshold
Nationwide wants greater government support [aka free money] for first-time buyers and savers ahead of the Chancellor’s Autumn Statement as rising costs delay owning a home and building a nest egg.
Nationwide is calling on the government and policymakers to:
Support for borrowers:
- 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.
Support for savers:
- Increase Personal Savings Allowance (PSA): Nationwide is calling on the government to increase the PSA2, which was introduced in April 2016 at a time when the interest rate was just 0.50% – more than ten times lower than today’s 5.25%.
- Back then, based on the average rate paid on a non-ISA savings account (1.11%), 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%).
- 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 c17 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, said: ”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.”
Charlie Lamdin’s reaction:
Ffs. Interference from government into “free” markets may or may not provide short term help, but always results in long term problems.
It is reasonable to argue that endless government stimulus in the housing market is the primary cause of prices rising too fast and pricing so many people out of a home.
The “Help to Buy” scheme (also known as “help to sell new houses”) is already biting it’s users in the behind as many find themselves in negative equity having overpaid for a home that immediately became worth less than they paid once it was ‘driven off the forecourt’, to mix a metaphor.
The housing market is well into a period of correction. This should be left unfettered, and housing should re-price itself according to economic realities.
Any more government stimulus, especially any that artificially boosts demand, will just make the problem, and the pain caused by it, greater.
Nationwide is “the world’s largest building society” according to its press release. It should therefore be able to comfortably withstand a house price correction.
If it can’t, then it overextended itself, with its borrowers, and nature should be allowed to take its course.
Don’t think they are asking for the H2B scheme to come back, just the H2B ISA, which is fine. The free market is not working though, it destroyed the market in the run up to 2007/8 and we need proper protection for borrowers. 1) remove the SVR concept, immediate affordability improvement 2) remove the LTI, everybody should be able to borrow what they can afford 3) extent affordability stress to 10 years from 5 to incentivise borrowers to select safety and 4) reform the mortgage guarantee for first time buyers so there are no side effects.