Mortgage reform: supporting home ownership in the UK

Introduction

As we celebrate the rich history of building societies in this country, it is only right that we take this opportunity to take stock of our collective achievements to date, and to look ahead.

In this industry there is now a strong culture of responsibility and prudence and customer support, which has paid enormous dividends. Despite the cost-of-living crisis and a sharp interest rate correction, mortgaged household finances have remained remarkably resilient. 

A safer and more resilient mortgage market

Loan performance is markedly strong when compared to similar periods of economic stress – over 99% of mortgages originated since 2014 are on track. Repossessions are below pre-pandemic levels – there were 1,000 repossessions in Q4 2024, fewer than in any quarter before Q2 2020.

Together we have built a safer and more resilient mortgage market.

But we also know it’s a market that some creditworthy people can struggle to access, with home ownership an increasingly challenging aspiration for many.

I was fortunate that when I came to buy my first home, a one-bedroom flat, it was over 20 years ago when the conditions, in particular home prices, were very different to today.

But I know from more recent experiences of family members, what it means to buy that first home in today’s market, how difficult it can be and the need for family support. And I am aware that kind of support does not exist for everyone.   

The first rung on the ladder 

Today, successful first-time buyers tend to have higher than average household income and large deposits. Our data shows that across the market first-time buyers present no additional risk or underperformance to any other type of borrower. Safety may have come at the expense of accessibility – and in doing so, what other risks are we potentially creating for the future?

And that is not to say we don't recognise the efforts of building societies and credit unions in recent years to support first-time buyers across their communities across the country.

You lead the way in shared ownership lending, accounting for over 50% of all shared ownership mortgages, as well as exploring solutions for those with smaller deposits or using rental payments to assess creditworthiness.

But if you are single; have no familial support; paying rent that is as much, or more, than a mortgage payment; have irregular income; self-employed; or faced any previous financial difficulty – you are much less likely to secure a mortgage.   

And for those who can, affordability has been stretched, with the increasing numbers of consumers borrowing into later life. 

Why access to mortgages matters

For 250 years, building societies have led the way in the mortgage market, providing community-driven and innovative financing to fulfil the ambitions of aspiring homeowners. 

These new homeowners benefit from security of tenure, and greater financial resilience. 

Average mortgage payments are currently 20% lower than rental costs, and 9% of private renters who move each year do so because their landlord has asked them to leave. Meanwhile renting in retirement could require around £400,000 more in savings than owning a home.

Our research finds that renters are more likely to struggle financially. So, if we can increase the numbers of first-time buyers, we can expect tangible benefits for individuals, firms, and our public finances. 

A market that can serve everyone

But this isn’t just about the first rung on the ladder, we need a market that can serve everyone. 

As my colleague Emily Shepperd noted last year[1], as term lengths extend and the average borrower gets older, later life lending is no longer a niche, but increasingly the norm. We all need to face up to the complexities – and opportunities – of increased consumer need to continue borrowing into later life. 

For those borrowers who, today, need to maximise their mortgage term to secure a home – what steps do you need to take to support those customers manage risks arising from holding that debt for longer? 

More broadly, we also know that retirement income alone will not be sufficient for many people, and the rising costs of old age – whether for care, private medical bills, or the bare necessities – mean that asset-rich does not equate to comfortable. There is around £9.10tn stored in this country’s housing stock – and outright ownership is the fastest growing tenure. 

A need for innovative solutions

As consumers may increasingly need their home to finance retirement welfare and lifestyle needs, should it become easier for customers to access their wealth? How could this option be made more attractive, and offer greater value? Regulators alone cannot solve this. 

But fortunately, I am speaking to the experts on later life lending – building societies account for 57% of retirement Interest-only mortgages. And better still, innovation is woven into the history of this sector. 

The first fixed-rate mortgage, now so ubiquitous it is hard to imagine the market without them, was offered by a Building Society. I’m here to ask you – what comes next?

Supporting growth

Our Mortgage Rule Review[2] stems from our new five-year strategy[3]. In our strategy we set out our objectives to support growth and help consumers navigate their financial lives. 

We have shown that, by rebalancing risks, we can lead efforts to unlock investment and growth. We want to enable consumers and firms to take informed risks – and in doing so support a dynamic and competitive market. 

Our recent statement on the interest rate stress test has already prompted several firms to embrace the flexibility in our rules, ensuring more borrowers can access affordable mortgages. 

And we have today launched a consultation paper[2] on proposals to create more flexibility with our rules. We want to make it easier, faster and cheaper for borrowers to make changes to their mortgage.

Improving access to mortgages

Today, we lay out proposals to make it easier to:

• remortgage with a new lender
• reduce the length of a mortgage term
• engage with customers outside the regulated advice process

We are also proposing to retire guidance that has served its purpose to reduce the regulatory burden on the industry, while maintaining clear expectations on outcomes for consumers through the Consumer Duty[4]. 

These proposals can allow lenders greater scope to innovate and develop their own approaches to deliver good outcomes, and in doing so empower borrowers to make the right choices for their mortgage. So, I challenge you all to engage with this consultation fully. This is only a first step.

Meaningful change

In June, we will open a discussion on the future of the mortgage market and conduct regulation. 

We will address several themes, including those we could begin to explore today:

• the market’s collective appetite for risk, and how we might approach managing changes to risk appetite
• how we can create space for innovation, for example, through changes to affordability assessments
• how customers are supported to access the market and make the right choices, for example, through changes to our disclosure requirements, and
• how we ensure we are all prepared for an increase in demand for later life lending.

Delivering a more accessible market

The mortgage market has managed significant economic challenge and regulatory change over the past decade.

We will use this discussion to help inform where we can make meaningful change to support this industry and consumers.

We are listening and considering carefully about where to target our efforts to deliver a more innovative and accessible market.

Our aim is a mortgage market that works better for all potential borrowers who can afford to repay. Including those who currently find it less accessible than they should, saddling them with higher rents and less security.  

A collective effort

I hope you engage with this discussion enthusiastically and openly. We will be providing a range of opportunities to input. Because just as the members of Ketley’s Building Society had to come together to build their homes, we cannot do this alone.

It will take a truly collective effort on the part of lenders, our fellow regulators, Government, developers and others to tackle the structural challenges facing the UK’s current housing market. Reforms to conduct regulation will only ever be one part of the solution to home ownership. More homes so house prices don’t move further out of reach. Improvements to productivity to boost incomes.

And to make the changes meaningful, we need you – the industry to take up the gauntlet of innovation, to use the flexibility we aim to create, to make meaningful progress for our communities.

So I ask you to consider where you can do more today. Where you can innovate, explore new ventures, and review your practices to meet the long-term needs of your customers. And generate sustainable growth.

We stand ready to support you in this. 

Conclusion

The mortgage market is in a good place, a place that delivers value to its customers. These are the foundations we build upon.

We can now ask ourselves how can we create more opportunity, and where this involves additional, responsible risk-taking – what is holding us back?

You don’t need me to tell you the value of a mutual endeavour, or what can be achieved when we look with hope to the future, as Richard Ketley did 250 years ago.

So I ask you again to work with us as we look ahead, and to continue to do what you’ve been doing since 1775.

Help our communities, building a better future, and helping ordinary people benefit from home ownership.