"We only need look at the success of HTB1 whereby mortgage availability, Government support, and first-time buyer demand helped to stimulate house construction to see how we might push this further forward"
The Committee makes some interesting recommendations, not least calling for 300,000 new homes to be built each year in order to make up for the shortfall over the last decade and to initiate what it calls a ‘moderating impact on house prices’. Given that the industry has not been able to meet the industry standard figure for new homes – namely 250,000 – indeed, have we even got that close to 200,000, it might seem a rather ambitious target to achieve. The Government’s own ambition for a million new affordable homes during the life of this Parliament seems even further away than it did before the EU referendum vote.
That said, the report does come up with some plausible suggestions for how this might be achieved, namely getting rid of the borrowing restrictions currently placed on Local Authorities in terms of funding social housing, encouraging LAs into partnerships with housing associations and institutional investors, and making more public land available for building, with an individual Cabinet Minister responsible for seeing this is done.
As a number of commentators, including Ray Boulger, have pointed out however there is little in the paper about the way the mortgage market might help stimulate supply. We only need look at the success of HTB1 whereby mortgage availability, Government support, and first-time buyer demand helped to stimulate house construction to see how we might push this further forward – indeed, it’s possible to prove (as we have done in the past) that pretty much all the new-build activity over the last couple of years is down to the introduction of HTB1.
So, given this ‘new’ Government’s focus on getting more first-time buyers into their first homes, and potentially those being new-builds, what might we do next – perhaps within the scope of HTB1 or outside it? We all know that the ‘raising of the deposit’ remains the number one problem for potential first-timers, and that most research suggests the actual monthly mortgage amount can often be considerably less than the individual(s) previous rental payments. The problem is getting to that point.
In a very true sense, it’s not about ongoing affordability it’s all about the deposit. Again, somewhat disappointingly, there is no mention of the role of private mortgage insurance in the House of Lords’ paper but we believe this has a considerable role to play. The supply of high LTV mortgages is absolutely crucial in order to get more first-timers on to the ladder and we are clearly playing our part in helping lenders deliver 90/95% LTV products to market. Some in the market are advocating the return of products beyond this LTV – we have seen the ‘return’ of 100% LTV mortgages albeit with the caveat that a considerable sum is also put away by a guarantor.
While the supply side problems of housing construction clearly need action we should not be neglecting how the mortgage market can essentially do its bit. Getting those potential buyers over the deposit hurdle still seems like the biggest challenge, given the price growth over the last few years. Therefore as an industry, particularly lenders and insurers, we need to look at all the available options in order to find the necessary solutions. By doing this we may have the opportunity to grow housing numbers and to help Theresa May reach out to more of those who are currently willing to buy but (for any number of reasons) are not quite able.
