‘The first comprehensive review of the mortgage market for a decade….’
So reads the government’s press release following Boris Johnson’s clutch of housing market-related announcements earlier in June.
If you thought it looked like a hotch-potch of measures, designed to try and take some of the sting out of a rather close ‘Vote of No Confidence’ for the prime minister, I may well agree with you.
You can’t rob PRS Peter to pay FTB Paul
The headlines were taken by an apparent focus on delivering Right to Buy for housing association tenants, although it looks as if, initially, this will be only another small pilot to start with, and it has to be funded from existing budgets.
Then there was the so-called Benefits for Bricks measure for those working people claiming housing benefit to be able to choose whether to use that money for a mortgage or pay it to a landlord. To say there are a number of potential obstacles to overcome with this — not least whether lenders will have any appetite to get involved — would be something of an understatement.
Make the process slick, less stressful and less prone to wasting time, energy, investment and resources
And then, another review into the mortgage market. The government says it is the first in a decade, but anyone involved in our sector knows it is constantly under review, most notably by the Financial Conduct Authority and the Prudential Regulation Authority, not forgetting the government’s Department for Levelling Up, Housing and Communities, and all manner of other bodies set up to oversee those involved in it.
The review appears to be focused on first-time buyers (FTBs); a demographic that has hardly been far from the thoughts of various governments over the past couple of decades.
You’ll sense a lack of joined-up thinking right across the board
What questions will it ask that have not been asked every single day since the credit crunch? Why is it difficult to save for a deposit? House prices are high, incomes have not kept pace and savings rates have been pitiful.
Why is it difficult to get a 5% deposit? Well, prior to the government guarantee, lenders didn’t want to go up that particular risk curve — now they are more likely to offer them.
Why aren’t more people on the housing ladder? All of the above, plus a lack of supply, a lack of new-build and a lack of affordable homes.
If you’re going to intervene in the market, you have to accept there will be ongoing consequences
These questions are all well known and one wonders what a review may come back and tell us that we don’t already know.
Greater use of mortgage insurance by lenders will help drive more 95% loan-to-value products? We know this.
Deposit levels are very high, even if you’re saving 5%? We know, which is why the Bank of Mum & Dad is more popular then ever.
My great fear is we will get an independent review of the mortgage market that, once again, comes back and says we need more long-term fixed-rate mortgages
Renters find it difficult to save money for deposits? Well, this isn’t helped by the government’s hammering of private rental sector (PRS) landlords to such an extent that they sell up, meaning less supply, meaning higher rents.
You’ll sense a lack of joined-up thinking right across the board. I can’t deny we need more new FTBs, but various governments have attempted to deliver this by believing it is all PRS landlords’ fault. Sweat their asset and it will end up in first-timers’ hands, won’t it?
The answer is no, especially when many FTBs want new-build homes, which of course we are not building enough of to meet that demand.
The government says it is the first review in a decade, but anyone involved in our sector knows it is constantly under review
Turning Generation Rent into Generation Buy may seem a laudable policy but we should accept we’re not starting from scratch. You can’t rob PRS Peter to pay FTB Paul and, if you’re going to intervene in the market, you have to accept there will be ongoing consequences, especially if the supply of property across the board is nowhere near enough. Rising rents, rising prices….
Far more complicated
My great fear is we will get an independent review of the mortgage market that, once again, comes back and says we need more long-term fixed-rate mortgages, like they have in many other countries.
We have them here in the UK, but they’re not going to be responsible for getting thousands upon thousands more FTBs into new homes. As someone may want to point out to the prime minister, it’s far more complicated than that.
The headlines were taken by an apparent focus on delivering Right to Buy for housing association tenants
Instead, why not start with improving the homebuying and -selling process for everyone? That in itself would get more people into more homes, rather than the thousands every year who see their transaction fall through.
Make the process slick, less stressful and less prone to wasting time, energy, investment and resources and we will naturally get more people moving and on the ladder. It would be a good first step.
Mark Snape is chief executive of Broker Conveyancing
This article featured in the July edition of MS.
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