Breaking the cycle of the intergenerational wealth lottery

Access to home ownership in the UK has become increasingly dependent on financial support from parents. But with people becoming parents later in life, is this model sustainable?

As the average age of the UK first-time buyer continues to rise, it raises an important question about the long-term sustainability of our reliance on intergenerational wealth. While the Bank of Mum and Dad plays a key role in helping some people purchase a home, it is also deepening the wealth divide and limiting social mobility.

Home ownership creates wealth, financial security and an asset that can be passed on to future generations, helping to establish a positive cycle of prosperity. But what happens if the average age of home ownership continues to increase?

Families are being started later, meaning parents have fewer years to build housing wealth before their children reach adulthood. This compounds the challenge across generations. As an industry, we need to ensure that people are not disadvantaged simply because their parents do not have wealth to pass on.

There is a large cohort of aspiring homeowners who have demonstrated financial responsibility and can comfortably afford mortgage repayments, but who lack the ability to accumulate the upfront deposit required to buy a home.

How do we break the cycle? 

Look at affordability more holistically 

The FCA is already exploring how mortgage rules can support greater access to home ownership while maintaining responsible lending standards. However, lenders should also be considering affordability and individual circumstances more holistically. 

A deposit can act as a risk mitigant, but it is not the same as affordability. We need to become better at identifying who can genuinely afford to own a home by making use of all the information available to us. 

For a first-time buyer, rental payment history, consistent financial behaviour and evidence of financial resilience can often provide a clearer picture of affordability than the size of their deposit alone. Someone with a gifted £30,000 deposit is not necessarily a better mortgage customer than someone without a deposit who can demonstrate these qualities. 

As an industry, we must do more to use this information effectively and ensure we are not excluding otherwise creditworthy borrowers simply because they have been unable to accumulate a deposit. 

Making better use of low and no-deposit options 

We cannot rely solely on future regulatory reform to solve the housing affordability challenge, nor can we continue to view deposit size as the primary measure of mortgage readiness. 

Through carefully designed high-LTV products and lending criteria, we can recognise an individual's ability to afford home ownership without compromising responsible lending principles. 

We are already beginning to see innovation across the market, particularly within the building society sector, through the introduction of low and no-deposit mortgage products. This momentum must continue if we are to widen access to home ownership for future generations. 

The role of the broker has never been more important 

Brokers play a vital role in helping lenders understand the limitations of traditional lending models and in helping customers demonstrate their ability to take on a mortgage responsibly. 

Rather than asking, "What can this customer afford to borrow?", the conversation should increasingly focus on, "What is preventing this customer from becoming a homeowner?" and "How can we overcome that barrier responsibly?" 

Brokers should also be willing to challenge the assumption that a borrower without a deposit is inherently high risk. Many first-time buyers who have been unable to save a deposit can still demonstrate excellent credit histories, stable employment, manageable levels of debt and a proven track record of meeting rental commitments. 

These are often the attributes that indicate long-term mortgage sustainability. 
By working together, lenders and brokers can help break the cycle of the intergenerational wealth lottery and enable a broader range of people to achieve home ownership.