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A nation of FTBs in need of flexibility

by: Bob Hunt, CEO of Paradigm Mortgage Services
  • 04/04/2017
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A nation of FTBs in need of flexibility
I have plenty of sympathy with Jamie Pogson from Plymouth.

In case you don’t know, Jamie is the brains behind a Parliamentary petition which calls upon the government to allow the payment of rent to be taken as proof that an individual is able to afford a mortgage.

That petition has over 144,000 signatures which means it has to be considered for a debate in the House of Commons. Clearly, there are a lot of people who support the message Jamie is trying to send.

The plight of potential first-time buyers is well known, certainly by advisers who I’m sure have plenty of clients who do not currently meet affordability criteria and yet, with a deposit available to them would actually be paying less each month on their mortgage than they currently do on rent.

It’s not a new problem, with the move away from low-deposit mortgages and the more stringent affordability assessments being part of the market for some time.

 

More acute

However, one can’t help but wonder if that problem has become slightly more acute in 2017, in particular with the end of Help to Buy 2 Scheme which certainly brought more lenders into high loan to value (LTV) lending and acted as something of a catalyst for others to follow suit.

While a number of former HTB2 members have continued to offer 95% LTV loans, other prominent, large, mainstream operators have not and therefore there is currently less choice for those who only have 5% deposits.

Add in the affordability scenario that is currently scuppering the likes of Jamie and his peer group, and you can fully understand why the level of frustration is growing and why many potential home purchasers cannot see any light at the end of the tunnel.

 

A closed door

For what it’s worth, I’m hopeful that Jamie isn’t knocking on a closed door here and there may be solace to be sought within the government’s own Housing White Paper. There was something of a gear change here with the government’s setting out a tenure neutrality view, seemingly placing the rental market on a more level playing field with home ownership.

Now, while this might ostensibly have been talking about the building of new homes and the need for more supply when it comes to homes to rent as well as homes to own, there also has to be a shift in mindset in terms of what it actually means to rent today, the costs involved, the responsibilities that come with it, and how this might be translated into home ownership.

To me, it does seem right that a tenant’s private rental payment record – over a suitable timescale – should be taken into account when looking at their ability to pay their mortgage going forward.

 

Complexity requires flexibility

The housing market within the UK, particularly the growth in generation rent numbers, is much more complex than some might realise. There has to be a nuanced, flexible, individual approach to potential borrowers adopted – many lenders do this of course already but I’m worried if the overall structure they have to work within is far too prescriptive.

Of course, I understand the government and regulator’s reasons for this – they do not want mass arrears/possessions, and they do not want another credit crunch.

However we must consider who the lifeblood of the market is, we must consider how they house themselves and how they pay for it, and we must also perhaps begin to trust lenders to act responsibly and to be able to make lending decisions which focus on the individual rather than just relying on somewhat arbitrary catch-all stress testing.

The sophistication and complexity of the UK borrower is growing, and I would like lenders to be allowed to match that. I’m sure Jamie, and many thousands like him, would also agree.

 

Since writing this article, the government has published a response to the petition. A debate in the House of Commons is still to be scheduled.

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