The Bank of England is being criticized for keeping mortgage rates high, particularly for young homeowners, according to Rob Perrins, the chief executive of Berkeley Group. He believes that the Bank needs to reconsider its rules that require lenders offering riskier mortgages to hold a certain amount of capital. Perrins argues that the Bank should shift its focus from stability to growth and reduce the barriers for young people looking to buy homes.
Currently, the average rate on a two-year fixed rate mortgage for a buyer taking out a 95% mortgage is significantly higher than for those taking out a 60% mortgage. This means that buyers with smaller deposits end up paying much more in interest, making it harder for first-time buyers to enter the property market. Perrins suggests that the Bank should equalize rates for different loan-to-value ratios to make homeownership more accessible for young people.
In addition to high mortgage rates, Perrins also criticizes the limits on the share of loans mortgage providers can lend above 85% loan-to-value. He believes that these restrictions further hinder young buyers from purchasing homes. Perrins points out that government schemes like the mortgage guarantee scheme and Help to Buy equity loan scheme may not effectively address affordability issues if mortgage rates remain high.
Despite the challenges in the housing market, Berkeley Group announced plans to launch a build-to-rent platform to develop and rent out 4,000 homes over the next decade. This initiative aims to provide more housing options in a market that is currently dominated by smaller landlords. While Berkeley experienced a drop in new home sales and pre-tax profits, the company remains optimistic about its future prospects.
Overall, the debate over high mortgage rates and their impact on young homeowners highlights the need for policy changes to promote homeownership among first-time buyers. By addressing the affordability challenges in the housing market, the Bank of England and the government can help create a more inclusive and sustainable housing market for all.