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Homeownership data should give government and lenders a reality check – AmTrust

by: Pad Bamford, business development director, AmTrust Mortgage Insurance
  • 10/08/2016
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Homeownership data should give government and lenders a reality check – AmTrust
Much of the recent talk has been around how Brexit could affect the UK housing market, and we are right to focus on this, however, we can’t ignore the far more deeply-ingrained issues which have been underpinning and shaping the market for many years.

These include, of course, the chronic under-supply of homes – as recently highlighted by the House of Lords’ Select Committee on Economic Affairs report, Building more homes – coupled with (and clearly related to) the falling number of those who actually own their own homes, as evidenced by the recent research from think tank the Resolution Foundation.

It appears to have come as something of a shock, particularly in media circles, that homeownership levels in the UK have been falling since their peak of 71% in 2003 and have now reached 64%. Regionally, and particularly in English cities, the drop appears to be even more marked with many highlighting Manchester for instance, where homeownership fell from 72% to 58% over the same period. It will not take a genius to work out that should this trend continue for the next couple of decades, we will be looking at close to, perhaps even less than, 50% homeownership.

Underlying issues

Understandably, and quite rightly, the Resolution Foundation points to many of the underlying issues we have been warning about for some time. House price growth far exceeding wages and the difficulty potential first-timers have in securing a deposit for a property both lead the way and result in a significant increase in renting rather than ownership.

Again, to reiterate this is not just a theme in London or Outer London, or just England, but right across the entire country – homeownership levels have dropped by 10.5% in Northern Ireland from their 2006 high point. The same can be said of England which has seen a 7% drop, Scotland (6%) and Wales (5%).

These figures will no doubt give the new Prime Minister, Theresa May, and her Cabinet something of a reality check in terms of the job they have on their hands in meeting their stated ambitions to increase homeownership levels (particularly among the young), and ensure housing supply can get anywhere near to demand, let alone satisfying it.

Translating products into lending

The growth in house prices, the fall in high LTV mortgage products, and the increased difficulty in saving for a deposit alongside all other financial commitments, is hindering would-be first-timers. High LTV product growth has improved in recent years but translating products into lending is not simply pre-determined. Product choice still needs a lender willing to say yes.

Even putting together a 5% deposit – especially without the intervention of the Bank of Mum and Dad – can be a savings bridge too far and therefore as a lending market we may need to move further. Products that require a deposit size of 2%-3%, perhaps alongside longer terms, could be a potential new sector, and one that might be achievable with forward-thinking lenders.

Undoubtedly, something will have to change if the government is to move homeownership levels, particularly among first-timers, onto the front foot. This requires real, joined-up thinking with the mortgage market at the forefront – if not then I suspect the steady slip of home ownership levels downwards will continue for some time to come.

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