Each month, Mortgage Solutions and Specialist Lending Solutions sit down with a key intermediary industry figure to discuss strategy, the opportunity for brokers and the mortgage marketplace.
This month, we are sitting down with Paul Broadhead (pictured), head of mortgage and housing policy at the Building Societies Association (BSA).
How did you get into the mortgage industry?
By chance. I applied for a role at the (then) Halifax Building Society that just happened to be in its mortgage processing department, based in Manchester. We did all the underwriting and servicing for lending in the City of London, so I learnt a lot about the industry there.
What has been your biggest learning over your career?
If you are trying to change something, never stop explaining to people; it’s when you are tired of repeating yourself that often people finally hear what you’re saying.
It’s also important to make it easy for people to do business with you, do what you say you will, and ensure your processes are slick (this isn’t simply technology) – and remember, from a borrower’s perspective, they are not buying a mortgage; they’re seeking a service that helps them to realise their dreams.
How the housing landscape is set to shift
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Recent figures shared by the BSA show that building societies account for 72% of all growth in the sector and are crucial to supporting first-time buyers. Is that trend set to continue, and what are the areas of growth?
Building societies were set up 250 years ago to help working people achieve homeownership, and since then, they have continued to adapt to the market conditions of the day, finding innovative ways to maintain that focus, and that’s not about to change.
There are lots of examples of how societies are currently innovating to support first-time buyers, from Nationwide’s six times income to Skipton’s 0% deposit, Yorkshire’s £5,000 Deposit Mortgage and Cambridge’s rent-to-home scheme, among many others. Building societies have also led the way with a strong focus on shared ownership and self-build, along with other creative solutions such as joint borrower sole proprietor (JBSP) loans.
However, societies could do even more if the government delivers a housing strategy that encourages homeownership and provides opportunities for first-time buyers. The Chancellor has committed £5bn to housing, of which £500m will be for affordable housing. This must include support for affordable homeownership, such as shared ownership. This stepped approach to buying a home is an essential route for many individuals to move from social and private renting into homeownership.
The Building Societies Act amendment came into force last year, giving them a greater capacity to lend. Has that had a material impact in the last year?
Not yet – but we’re working on it. We still need the government to progress the related secondary legislation to bring most of the changes into effect.
One of the challenges we face as a sector is that most legislation is written from the perspective of shareholder-owned businesses – the changes made to the Building Societies Act last year were equivalent to some made in the Companies Act 2006.
Despite this, building societies still accounted for 72% of all mortgage growth in the first nine months of 2024 (latest stats available), which shows the significant contribution they provide.
The Financial Conduct Authority (FCA) has said it will look at changing regulation to boost mortgage affordability. Will this be beneficial for the market and for building societies specifically?
We know that first-time buyers face a considerable affordability challenge, and we have repeatedly called for a regulatory review that considers the relative costs and benefits of stricter regulation versus the social benefits of homeownership.
Building societies have a proven track record of lending responsibly, but there are specific areas of regulation where more flexibility is needed to support borrowers, and, in particular, first-time buyers.
Examples include the ability to increase lending to first-time buyers above four-and-a-half times income and to offer part repayment, part interest-only lending with the flexibility to shift between them. These changes could improve affordability for many and be the difference between being able to get on the property ladder and not.
Ultimately, we want to see first-time buyers requiring smaller deposits and a reduction in the proportion of them needing support from family and friends to buy, while ensuring we continue to lend responsibly.
What are the areas of focus for the BSA in the coming year?
We have three main areas of focus, all of which I have already touched on:
- Regulatory change to support growth – a review of the relative costs and benefits of stricter regulation versus the social benefits of homeownership, leading to more flexibility, while retaining affordability testing to protect consumers.
- Long-term housing strategy – delivering the one-and-a-half million homes promised across all tenures, enabling diversity of supply. This will make homes more affordable, more available, and more appropriate to the needs of those living in them, and ultimately support more aspiring first-time buyers to achieve homeownership.
- Climate change and retrofit – there are 29 million homes in the UK that need some form of energy-efficient retrofit if the UK is to meet its net zero by 2050 commitment. Currently, there are insufficient people, processes, skills or infrastructure to decarbonise our homes, so a clear long-term transition strategy is urgently required.
What are your expectations for the mortgage sector in 2025?
I’m cautiously optimistic for 2025. While our recent Property Tracker report shows affordability is still a big obstacle for borrowers – both the cost of buying a home and the cost of owning a home – we have already had some encouraging signs for the year ahead.
In its first meeting of the year, the Monetary Policy Committee (MPC) reduced the base rate, with more cuts expected throughout the year. We’ve also got strong signs that mortgage regulation will be reviewed this year to further support affordability.
These are positive indicators for the market, but we must continue to push for a realistic housing strategy that not only helps today’s borrowers, but also future generations of homebuyers.
What is coming up in the building society sector?
2025 is an exciting year for building societies. We are celebrating the 250th anniversary of the first known building society, which was set up in Birmingham in 1775. We are also celebrating two banks being brought into mutual ownership, following the mergers of Nationwide Building Society and Virgin Money and Coventry Building Society and Co-op Bank.
We also have a commitment from the government to double the size of the mutual economy. As customer-owned businesses, the culture, behaviours and decisions at building societies (and credit unions) are different to other lenders. We’re not driven to maximise profits and instead take a long-term view, which is reflected in better rates, prices and products.
What would you want brokers and others in the mortgage sector to know about building societies and the BSA?
While not every building society will cater for every borrower’s needs, it is likely that a product for all borrowers’ needs can be found in the building society sector.
Many brokers are familiar with the offering from building societies and will take a deeper dive into the market rather than relying purely on the standard tables. With so many new borrowers having ‘non-standard’ circumstances, such as those who have side-hustles or a range of income streams, a tailored approach to underwriting is necessary – and available within the building society sector.
Also, building societies are the natural choice for individuals who prefer to do business with an organisation that puts people before profit.
