The Prime Minister David Cameron has promised the plan “will break the current cycle in which lenders won’t lend, builders can’t build and buyers can’t buy.”
A key announcement was the widely touted government and house builder backed mortgage indemnity guarantee for new build properties, aiming to get 100,000 first-time buyers access to 95% LTV loans.
In addition, there were announcements around supporting the private rented sector, self build, tackling empty homes and overhauling social housing.
The property industry has largely welcomed the plans, but with notes of caution:
CML director general Paul Smee
This [new build MIG] scheme is good news for home buyers, developers and indeed the UK economy. Lenders will be able to reduce the level of deposit needed by home buyers in the new build sector, enabling more buyers to buy and so supporting the flow of new housing development, with all its positive consequences for jobs and the economy as a whole.
UK lenders will not be compromising the quality of their lending or increasing their risk of loss through this scheme.
It is also anticipated that lending within the scheme will attract relief on the regulatory capital that would otherwise be required on high loan-to-value lending, because of the significant mitigation of the lending risk.
Paul Broadhead, head of mortgage policy at the BSA
We welcome the government’s support for a new build indemnity scheme initiative aimed at helping those with a modest deposit buy their own home. This joined up thinking from mortgage lenders, builders and the government is good for borrowers, the housing industry and in turn jobs.
For the scheme to deliver its full benefits to consumers, it is important that lenders of all sizes can participate. We look forward to working with the government to help ensure this is the case.
Grenville Turner, chief executive of Countrywide
The measures announced today are a step in the right direction and address the key fundamental issues that have restricted the housing market in recent years.
The government needs to ensure that its promise of increasing house building is followed through and not restricted by planning red tape.
Whilst the proposed new build indemnity scheme is a welcomed boost to homebuilders and prospective buyers, it is disappointing to see a lack of measures to assist the vast majority of home movers.
A Stamp Duty holiday for all homebuyers up to £250,000 by would have been a welcomed boost to the resale market and should still be considered.
We also welcome the consideration of tax break measures for buy-to-let investors. Any government support to encourage investment in the buy-to-let sector will help to relieve the supply and demand imbalance.
Charles Haresnape, managing director of Aldermore Residential Mortgages
Any initiative designed to help the housing market and first-time buyers in particular, has to be welcomed.
However, it will be interesting to hear precisely how the government backed mortgage indemnity scheme will work and how the proposed £400m house building fund translates into new homes.
At the moment there are approximately 100,000 new homes being built every year, but that figure needs to increase to 240,000 if demand for new housing is to be satisfied. It is suggested that the government proposed new initiative will result in just 16,000 new properties, which still leaves the government woefully short of its target.
Graham Beale, chief executive of Nationwide
This scheme seeks to boost the supply of properties available with modest deposits and, as such, we are pleased to be part of it, helping to shape its design and development.
We would really like to see people who are saving for a deposit given more help through higher ISA limits and the flexibility to move their funds between cash and equity ISA products, without the restrictions that are in place now.
Paragon Group chief executive Nigel Terrington
It is pleasing that the government has recognised the important role the private rented sector plays in providing a home to millions of renters.
It is important that the private rented sector has a committed base of investor landlords to enable it to grow, and fostering a fiscal and regulatory environment that encourages that is vital.
Institutional investment will only play a complementary role to the mainstay of the private rented sector, the private landlord, and so whilst there is a focus on attracting greater levels of institutional investment into the sector, policies must not favour institutions over individuals.
Stewart Baseley, executive chairman of the HBF
This scheme will allow people to buy their new home on realistic terms and help in particular hard pressed first time buyers.
It will also be a huge boost to house building. Since 2007, the biggest constraint on homes being built has been mortgage availability. This scheme will see more desperately needed homes being built, create jobs and give the economy the boost it needs.
Helen Adams of FirstRungNow.com
Funding which only supports new build is good for the house builders who are being subsidised, but does little to move the whole market as there is no onward chain when a new home is purchased.
Tracy Kellett, managing director of buying agents BDI Home Finders
If the government and house builders are taking on the risk, what will the criteria be for people applying for these loans? The real number of people enjoying the scheme is likely to be far lower than the headline number. The devil, as ever, is in the detail.
The government has become so focused on the first-time buyer that it has forgotten the squeezed middle. Any housing strategy has to cascade upwards through the chain, not focus purely on the first link.
Given the scale of the market crisis, it’s unlikely it can do anything at all. Ultimately, only the market can make the market better.
