Eight out of 10 first-time buyers refused mortgage
THOUSANDS of people who want to buy homes are unable to get mortgage approval and are stuck in a rental trap.
Some eight out of 10 first-time buyers are being forced to rent because they cannot get the funds to help them buy a home.
And large numbers are also forced to rely on their parents to help fund the purchase of new homes.
Most people think the Government should do more to help home buyers, according to research conducted from a sample of 1,000 adults on behalf of Genworth Financial.
Of those who currently do not have a mortgage, 61pc said it would be at least three years before they plan on taking out their first mortgage.
Four out of five of those surveyed believe it is difficult for first-time buyers to access mortgage funding.
A greater number want new measures to be introduced to avoid a return to the bad lending practices seen during the boom years, the survey of a broad range of people, found.
Large numbers believe saving for a deposit is the main barrier to home ownership.
Half of those living with their parents expect to be still living with them in three years' time.
Genworth's Angel Mas said his firm believes a new approach is required to avoid a return to untenable lending.
"People don't want to see a return to the unsustainable mortgage lending practices of the boom time and new approaches are required which can make finance available, but without creating systemic risk."
He said everyone buying a home should be required to take out mortgage insurance.
It is an insurance product banks and building societies take out to protect themselves for any losses suffered as a result of a borrower defaulting on their mortgage and being unable to repay the outstanding debt with the proceeds of the sale of the property.
"The advantage of introducing a universal mortgage insurance scheme targeted at first-time buyers would facilitate banks to safely lend to those with a smaller deposit on a more prudential and sustainable basis."
Mr Mas said a system of privately funded universal mortgage insurance will allow the Government to tackle the lack of access to mortgage finance for first-time buyers with good credit histories and the ultimate ambition to own their own home.
And this can be done as part of a programme to prevent reckless lending, he said.
Mortgage insurance is used extensively in the US, Australia and Canada.