It is incredibly encouraging to see the Government rolling up its sleeves and joining with lenders to help more people achieve the ambition of homeownership. For those of us on the front line of the mortgage market, the past decade has, at times, felt like a long road for aspiring buyers, marked by rising prices and affordability barriers.
The announcements made by Chancellor Rachel Reeves, in her recent Mansion House speech could represent the most significant mortgage shake-up in a decade and a welcome step in the right direction.
For too long, many people have felt locked out of the property market. These reforms, which include a permanent Mortgage Guarantee Scheme and a review that could allow renters with a good payment history to use their rental record to prove their affordability, offer a tangible sense of hope in what often seems like bleak times.
For years, renters have rightly felt aggrieved that their consistent, on-time payments, which are often higher than an equivalent mortgage, have not been formally recognised. Therefore, this review could be a game-changer, helping to build a more accurate and fairer picture of a borrower’s ability to manage monthly payments.
First-time buyers (FTBs) are integral to the success of the housing market. Their activity keeps the wheels of the market moving, so making mortgages more accessible for them is fantastic news for all the industry.
These measures signal that the Government is perhaps realising the critical role the housing sector plays in the wider economy and, with that, recognising the ongoing issues that need real healing, not just a loosely stuck on plaster. It is positive to see supply-side measures finally being matched with tangible support to help minimise barriers and create more potential buyers.
This Mansion House announcement comes shortly after Nationwide proactively cut the salary requirements for some of its FTB mortgages. The building society has lowered the minimum income for its ‘Helping Hand’ product to £30,000 for single applicants and £50,000 for joint applicants, a move it estimates will support an additional 10,000 buyers each year. This kind of innovation from the UK’s largest building society, working in tandem with Government support, is precisely what the market needs.
Naturally, there will be those who are concerned about deregulation or taking on too much risk. The spectre of the 2008 financial crash looms large in public memory, and the chief executive of the Financial Conduct Authority (FCA) himself has warned that “things are going to go wrong” if lending standards are relaxed too far.
However, a great many lessons have been learned since then. The landscape today is unrecognisable from the pre-2008 era of self-certified incomes and lax oversight. Post-crisis reforms, including the Mortgage Market Review (MMR), introduced stringent affordability checks and stress tests which remain in place. While these important checks and safeguards are not immune from the growth agenda, lenders today continue to approach innovation and risk responsibly.
Nationwide for example, reported that the arrears rates on their existing higher loan-to-income (LTI) products are lower than standard lending due to enhanced controls. This is not a return to the past but a sensible evolution towards the future, reflecting today’s economic realities.
In this more nuanced and supportive environment, the role of the professional mortgage adviser becomes more crucial than ever. Navigating the growing number of specialised products and varying lender criteria requires expert guidance.
Brokers can assess a borrower’s entire financial situation to find the most suitable and sustainable option, providing the human oversight that is essential for responsible lending. For a company like Just Mortgages, these developments are particularly welcome as they should improve access to finance and enable more of our customers to secure a mortgage.
Even with the surprise jump in inflation, a cut to interest rates is still widely expected in August. This growing consensus will hopefully give lenders a fresh opportunity to look at their mortgage pricing and provide further support for buyers at every stage of life.
Whilst challenges around housing supply persist, this renewed focus on collaboration between Government, regulators, and lenders has the potential to be a powerful combination. We look forward to helping more aspiring homeowners take their first step onto the property ladder.
John Doughty is chapter managing director at Just Mortgages
