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A 20-year government plan could give FTBs much-needed hope in a high-priced market – Bamford

by: Patrick Bamford, business development director at AmTrust Mortgage & Credit
  • 23/08/2021
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A 20-year government plan could give FTBs much-needed hope in a high-priced market – Bamford
A year ago, according to the Nationwide Building Society, the average house would have cost you just shy of £221,000. Fast forward to July this year, and that average house would now cost you just over £244,000.


That’s over a 10 per cent increase in 12 months when back in July 2020 the annual increase was 1.5 per cent. I suspect, in particular, first-time buyers were hoping that a prolonged period of stability might allow their incomes to catch up with house prices and they could save for their deposits in a far quicker timescale. 

Since then we have, what can only be described, as a frenetic market, fuelled by lockdown demand, pushed ever higher by stamp duty holidays, and still hampered by a severe lack of new housing supply. 

It is therefore no wonder that a recent residential market prediction from Savills suggested first-time buyers will increasingly need to be supported by a mixture of both government and parental support, with perhaps the latter taking most of the heavy lifting. 

I say this because, even with the government’s mortgage guarantee scheme having acted as a much-needed catalyst for the provision of 95 per cent loan to value (LTV) mortgages, we are still some ways short of the product numbers available pre-pandemic.  

And of course, with prices having moved into double-digit-increase territory, the amount of deposit required has moved significantly upwards. 


Higher deposits needed 

Where do you turn to if you don’t have that parental support? A year ago, your five per cent deposit for an average house would have been over £10,100 less than it is today, but then again, there were only a handful of five per cent deposit mortgages available and they all required some sort of parental, family or guarantor help. 

Yes, now we have more 95 per cent LTV loans but the deposit requirements are larger. And, let’s not forget, the housing market is much more competitive than it might have been without the government’s stamp duty holiday initiative. 


Strong competition  

The competition for homes has gone up significantly and those with larger amounts of deposit and equity are going to be much more in the box seat than those who can muster a five per cent deposit.  

Plus, of course, you will need a mortgage worth £20,000 more and the costs of funding a mortgage at this level are far in advance of what those with larger equity levels or deposit monies will have to pay. 

Again, rates are coming down, but there is still a considerable gap between 60-75 per cent LTV mortgage products and those at the 95 per cent LTV level.  


Looking ahead 

What happens next therefore is important.  

The Savills report suggests the government mortgage guarantee scheme could help 50,000 borrowers into a first property if it was as successful as the previous iteration of the scheme which ran between 2013 and 2017. 

However, this version is due to finish at the end of 2022, and unless the government of the day agrees to extend, we might not believe it is achievable to hit the same numbers within 21 months as we did between four years. 

We should also not forget that the Help to Buy scheme – now only available to first-timers – is also due to finish in 2023 and that delivers 40,000 purchases per year.  

What is going to fill that gap? And that’s without addressing the need for sustainable affordable homes, particularly for those who don’t have access to the Bank of Mum & Dad. 

Again, I can’t help but find myself hoping for some sort of five, 10 or 20-year plan for housing in this country, and a focus from government on working with developers and lenders and all stakeholders to deliver joined-up thinking, especially when it comes to helping first-timers onto the ladder.  

That hope might seem naïve, but it may be the only way to get a plan which can keep delivering year after year, otherwise both prices and homes may well remain out of reach for all but those with the most affluent parents or grandparents. 

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