Stamp Duty reform, more Government support, new housing schemes, regulatory action to allow lenders to lend more at high loan-to-value (LTV) levels, greater supply of homes, planning reform – all have, quite rightly, been mentioned in dispatches as areas of policy which the next Government could focus on in order to boost the number of first-time buyers getting on the ladder.
In my view, just as important would be bringing down the average age of a first-time buyer, while at the same time helping those who cannot access a ‘Bank of Mum and Dad’, and helping ensure those who want to access mortgages do not need to take out 40-year mortgages in order to do so.
Just listing all of the above shows what a complicated picture we have for would-be first-time buyers, and outlines the importance of mortgage advice in a marketplace where (thankfully) we do have a growing number of product options available, although some are clearly more ‘involved’ than others – for example, joint borrower sole proprietor (JBSP), guarantor mortgages, products that are based on rental payments, etcetera.
Clearly, these products are helpful, but they are also niches within a wider market that has, at times in recent history, been hindered by, for example, a lack of mainstream, high LTV mortgage options which have traditionally been the gateway to homeownership for so many young people.
It was not so long ago you could count the number of 95% LTV products on two hands, and while we have moved some distance from this point – and we do have Government intervention to thank here in the form of the original Guarantee scheme which acted as a major catalyst – we are still not where we were pre-pandemic and, in recent weeks, the figures seen to suggest we have seen a slight fall in product numbers.
Recent data out of Moneyfacts reveals the number of fixed-rate 95% LTV mortgages fell from 329 to 326 between the 23rd and 31st May, while the number of 90% LTV mortgages fell from 700 to 696.
Again, we should point out, that these are only slight falls – and they may present as a holding pattern while the General Election is on – but we should be tracking this data, plus our own research shows that during that period a number of the more competitive 95% LTV products were removed, no doubt as the money markets began to sense a Bank Base Rate (BBR) cut was moving further away.
That, in itself, is an interesting point to explore. Where just a couple of weeks ago, the mood music appeared to be playing into a June cut in BBR, now it looks less likely and we are instead much more likely to see action taken in either August or September.
I sense that a cut within the course of a General Election campaign will be seen as far too politically sensitive, and therefore members of the MPC might wish to keep their powder dry until we know who will be making up the next Government.
On that point, while housing hasn’t exactly exploded into the policy debate, my view is that it will play a prominent role in the weeks to come.
If you managed to watch the Leaders’ TV debate the other night, and made it close towards the end, you would have seen a question about the future for young people, which did touch on access to housing, with both Sunak and Starmer appearing to recognise how important turning housing dreams into reality is.
Whether this translates into the next Government focusing on key areas such as the supply of affordable homes in this country – Labour have pledged to build 1.5 million new homes over the course of the next five years – remains to be seen, but at the very least, it was positive to see this recognised as a key concern for younger voters during the debate.
Supply is of course at the heart of this, and as a result I am hoping there will be a continued focus on mortgage availability, affordability and how we improve the level of high LTV mortgages for those who will need them in order to buy.
We have started, I hope, to see a push beyond 95% LTV products, with a recognition that these are needed and they can help many borrowers. Post-election, we should continue to lobby lenders to explore what more they can do in this area, especially given that we have just a handful offering these at the moment, and there are some significant criteria caveats that come with them.
Lenders do have the option to utilise private mortgage insurance in order to be able to push past 95% LTV and a political and regulatory recognition of this will bring greater confidence to the market and help support a generation of young people who currently feel they are looking at a very long lead-in time before they can get into a home.
The next Government has a duty to give them hope and curtail that wait considerably.
Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International
