MPs have launched an inquiry into the barriers to homeownership for first-time buyers, particularly those on lower incomes.  

The study will look at how government supports FTBs through tax breaks, such as stamp duty, and financial products, such as special ISAs and mortgages, says the Housing, Communities and Local Government Committee. 

The Housing committee adds it is “likely” to examine the homebuying plans announced by  Chancellor Rachel Reeves this week, including the creation of a permanent mortgage guarantee scheme and a review of Financial Conduct Authority lending rules, which could allow prospective buyers’ record of paying rent on time to show they can afford mortgage payments. 

The committee points out that the average home in England cost seven times average earnings in 2014, according to the Office for National Statistics. 

This worsened to nine times earnings in 2021, although it has since improved to 8.25 times in 2023. 

MPs say: “The inquiry will also be exploring existing routes to affordable home ownership delivered by the affordable homes programme, including shared ownership, and how far these provide genuinely affordable routes to owning homes. 

“The committee is also likely to scrutinise the impact of proposed changes to the Right to Buy scheme on the ability of social housing tenants to own their homes.” 

Other questions MPs will look at include: 

• To what extent will increases in housing supply improve housing affordability for first-time buyers?  

• What are the barriers to moving to a system whereby prospective buyers’ record of paying rent on time is considered as part of a mortgage application? 

• How effective are financial products, such as special ISAs and mortgage products, at helping people get on the housing ladder, and how can they be improved?  

• Are current reliefs on stamp duty land tax sufficient to support first-time buyers to purchase their first homes? 

• Do existing routes to affordable home ownership, such as shared ownership, provide genuinely affordable routes to owning homes, and how could they be improved in the new social and affordable homes programme? 

• What impact will the provisions of upcoming legislation, including the Renters’ Rights Bill and the Draft Leasehold and Commonhold Reform Bill, have on the affordability of homes for FTBs? 

Housing committee chair Florence Eshalomi (pictured) says: “Decades of failure to build anything like the homes we need means that far too many people stand no chance of making the first step on the housing ladder. 

“If you don’t own your own home, and can’t turn to your family for help, how can you be expected to save up for a mortgage when more and more of your income is going on rent?  

“Ultimately, it’s crucial that more homes are built, and that the government deliver on its 1.5 million new homes target in this Parliament.  

“But, when the prospect of owning a home is so slim for too many people, it is important that we examine the routes to affordable home ownership and how the government could help foster better support for FTBs.” 

A key restriction that lenders had lobbied to be lifted, was to be allowed to underwrite greater loan-to-value lending, which was granted by the Financial Policy Committee last week. 

Since then, Nationwide, Lloyds Banking Group and Accord Mortgages have all launched expanded higher loan-to-value lending programmes.

The housing committee will accept submissions until 29 August.