BSA: Home ownership likely to be the biggest future financial divide

We are all probably aware of the importance of looking beyond current needs when it comes to managing a budget and saving up for the bigger things, such as a family car, and the biggest of those: a home.

It's very easy as a youngster to think that your financial security depends on the here and now, and on the amount of money coming in from your job, with the hope that it increases along with promotions. It's simple, too, to focus on immediate wishes rather than worrying about what things look like as you near retirement.

There are pensions, of course, both governmental and private, including those set up by employers, but would that be enough to see you through in your dotage? After years of work, are you going to find that you have to pull in the horns a bit from what you're used to, purely because you haven't got enough to maintain your lifestyle?

Interestingly, it has always been something of an adage that your pension could be found in the investment you made in bricks and mortar. Now the Building Societies Association has found that it is quite likely the disparity in financial security between those who own property and those who don't will be at its widest by 2050. This means that those who don't own their property will potentially be far less able to build their own financial security.

This comes from the BSA's long-term strategy report, Finance for a Fairer Future, which also identifies some key problems facing those who don't currently own property but would want to get into the housing market. In the workplace, reliance on a steady income has largely disappeared as those incomes have become increasingly unpredictable. There are higher levels of debt, not helped by the ongoing affordability crisis for even the most basic items. Savings are harder to factor in due to diminishing available funds, and there's less certainty around retirement incomes.

It shouldn't be underestimated just how much pressure public funds are under from an ageing population, which means younger members of the British public feel a significantly increased burden to fund their older selves when it comes to future care and housing costs.

According to the BSA's report, even existing homeowners might not come out of this assessment completely unscathed, as they find the necessity to fund adaptations and retrofits to their properties, as well as becoming increasingly required to help younger generations with the costs of stepping onto the property ladder themselves. As the BSA points out, housing wealth will become the asset that families increasingly rely on to support younger members.

The jobs market will also likely weaken as technology replaces traditional roles, making income far more unpredictable and, in turn, putting off prospective homebuyers who fear they can't necessarily keep up with payments in a guaranteed way.

So far, so gloomy. As would be expected from an institution that looks after the building societies providing mortgages, the BSA recognises that the financial sector needs to look at its own transformation, evolving mortgage and loan products to match the ever-changing housing market and the financial pressures inevitably placed on those considering buying their first home. That innovation and change, notes the BSA, will need to continue at a fast pace to support current and future customers.

Sarah Harrison, Chief Executive of the BSA, said of the report's findings:

"Home ownership has long been one of the foundations of financial security in Britain. But unless we act now, we risk creating a society where owning a home depends less on hard work and careful saving, and more on whether your family has the wealth to help you onto the property ladder.

At the same time, people's financial lives are becoming more complex. More variable incomes, longer lives and greater personal financial responsibility mean households will need trusted support to build resilience throughout their lives.

Building societies are already showing that there are different ways to help people achieve home ownership, including many who might otherwise think buying is out of reach, and are helping millions build stronger savings habits. As people's lives continue to change, we need to ensure the sector has the freedom to keep innovating, developing new products and services that reflect how people live and work today, while remaining true to our purpose of improving members' financial wellbeing."

If you are looking to move to a new home or buy your first but are bewildered by your options, a building society, bank or mortgage broker can talk you through the products available and help find the right fit for your circumstances.

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