Why Leeds Building Society is considering stopping lending on holiday lets - Martese Carton

In September, we published research which revealed 426,000 lost-first time buyers face being priced out of the housing market over the next five years. That’s 233 people per day.

We’ve been helping people save and get on the housing ladder since 1875.

But in all those years, home ownership was never as unaffordable, inaccessible, and unavailable as it is now. First-time buyers today face challenges incomparable to previous generations - a triple combination of historically high house prices, high deposit values, and high mortgage repayments.

The largest influence on affordability for first-time buyers is the conflation of rising deposit requirements and interest rate increases over the last 18 months.

Average deposit values stood at 115 per cent of average first-time buyer earnings (£68,700) in 2022.

This increased further to £73,100 in March 2023, or 26 per cent of total purchase price. In 2022 it took up to 12 years for an average private renter to save their deposit; the time required to save for a deposit while living rent-free stood at four years.

Those able to buy a first home will need higher incomes than ever before, with mortgage repayments amounting to 29 per cent of their take-home earnings, compared to 22 per cent in 2022, even though those who can afford to become first-time buyers in 2023 are earning more than their equivalents in any previous period.

It’s no surprise that home ownership has fallen by a third among young people.

To find answers and solutions we must look at the root cause of our housing crisis.

The growing political consensus on the need to build new homes is encouraging. And yet, we risk a lost generation of first-time buyers if we don't also take steps to improve supply immediately. That’s why Leeds Building Society became the first national mortgage lender to stop providing mortgages for residential second homes. We did so to be part of the solution to the housing crisis, by prioritising helping people to buy their first home.

Further supporting first-time buyers by ending new lending for holiday lets, where there is local support for this action, is the next option that we are pursuing. Our question is, can we be a valuable partner to local authorities seeking greater control against the growth of holiday lets?

There is a balancing act between the significant role holiday lets can play in local economies and the detrimental impact they can have on housing for residents. And we believe the choice is best placed with communities. Earlier this year we began discussions with local authorities to restrict new mortgage lending on holiday lets in areas where they feel those negatives outweigh the positives.

Our proposals would only apply to new mortgage lending – existing customers would remain unaffected – in specific locations as agreed with local authority partners. A 12-month pilot scheme will allow time to assess the impact before seeking to extend to other areas.

To those who ask why we are doing this, my reply is simple. Every generation deserves a place to call home. We need real change in the housing market; we need homes to become more affordable, accessible, and available.

It’s time to take action to tackle the causes, and not the symptoms, of our home ownership crisis. Solutions lie in building more homes of all types, increasing affordable routes to home ownership, and better supporting people to save for their deposit.

Martese Carton is Director of Mortgage Distribution at Leeds Building Society