What will the upcoming Budget have in store for the mortgage market?

We are now just a few short weeks away from the next Budget announcement, which will take place on the 27th October, and therefore traditionally we might have expected the recent Conservative Party Conference to provide some hints about what Rishi Sunak could be announcing at the end of the month.

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Patrick Bamford | Qualis Credit Risk
18th October 2021
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"Government support has undoubtedly worked, but it will not be around forever – neither should it be – and therefore as an industry we need to acknowledge what is required going forward"

After a tumultuous 18 months for the housing market, and with the stamp duty holiday having only ended in England last month, the anticipation must be that there will be few measures announced. Certainly, none that will have a seismic impact on the housing market like the stamp duty holiday did.

The recent appointment of Michael Gove MP to be the new Secretary of State for the brand-new Department for Levelling up Housing & Communities (DLUHC) does however appear to mean that we will get action. Gove is not known for sitting on his hands, however there are clearly going to be some major priorities for him to tackle not least cladding and leasehold.

That might lead you to believe that the mortgage market might not be a major consideration however at a Conference fringe event, Gove explicitly talked about the need for better quality social housing in the UK and he also highlighted ‘access to finance’ as being one of the major challenges to overcome.

Now, anyone looking at the lower LTV competition amongst lenders at present will probably acknowledge that access to finance isn’t an issue for those fortunate to have large amounts of equity or deposit to put down.

However, it is at the other end of the LTV scale where that Government focus is likely to be pinpointed and would certainly chime with the direction of travel it has taken in recent years, with an ongoing focus on first-time buyers and those who want to move onto the second rung of the ladder.

The Government Guarantee Scheme has acted as a significant catalyst for lenders in terms of bringing more 95% LTV products to market, but at the last count, their numbers were still down on pre-pandemic levels. And, of course, the Guarantee scheme is due to finish at the end of 2022, which in the grand scheme of housing timetables, isn’t too long at all.

This is why it is hugely encouraging to see momentum growing around a scheme like Deposit Unlock. Just recently Nationwide Building Society joined the initiative which allows both first-timers and second-steppers to secure new-build properties with just a 5% deposit, and clearly to have a major, mainstream lender like the Nationwide involved is fantastic news.

We at Qualis have played a significant role in the scheme, collaborating on its construction with the team at Gallagher Re and arranging the reinsurance capacity via AmTrust Europe Limited, and with more lenders due to come on board very shortly, we see this as a credible alternative to, for example, the Help to Buy Equity Loan Scheme which will also finish, but not until March 2023.

The industry supporting itself, without the requirement for State intervention, has long been talked about and it will be schemes like Deposit Unlock which will get us to this point. There have always been credible private alternatives to the Government’s guarantee scheme for instance, which are not so costly and provide far greater flexibility for lenders.

It’s a real positive to see lenders looking to utilise these alternatives and working with a variety of stakeholders, such as the Home Builders’ Federation, in order to make these schemes happen, and to provide potential (and existing) homeowners with lower deposits the opportunity to become owner-occupiers.

As mentioned, Government support has undoubtedly worked, but it will not be around forever – neither should it be – and therefore as an industry we need to acknowledge what is required going forward and how it can be delivered. We fully anticipate that Deposit Unlock will play a major role here as we seek to ensure that future generations have all the opportunities, they need to purchase a home and move up the ladder.

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