It goes without saying that the country’s period of mourning for the death of HM Queen Elizabeth II takes us into uncharted territory and when we look back at the market during this period, there will be an asterix attributed to it.
That said, ours is a sector that is becoming accustomed to uncertainty. And in that sense we, as stakeholders, have become ever better at being prepared for every eventuality that might happen, although none of us will have been ready for what has happened during this month.
Of course, a new king is monumental news, but, perhaps, of greater importance to our property and mortgage markets is the new prime minister, the ‘new’ government, the new housing minister, and the policies which will either be forged out of this, retained from the previous administration, or ditched wholesale.
Speculation abounds about what comes next, with much focus on the potential ditching of housebuilding targets, but we as an industry are also having to come to terms with a rising interest rate environment, a cost of living crisis, rampant inflation, and the inevitable impact this will have on the mortgage market.
A market like none before
Potential first-time buyers, by definition, will not have witnessed a market like this before, and even in the low interest rate period we’ve had over the last decade, this borrower cohort has been paying far more for their mortgages than those with more equity/deposits to put down.
It has never been the case that first-time buyer/high loan to value (LTV) mortgages have been near the levels of the bank base rate (BBR), so no change there then. However, the current crisis and rising interest rates, do undoubtedly make the situation more difficult for first-timers in terms of meeting lender affordability measures and criteria, especially when more of their monthly income will be needed to meet mortgage payments.
At the same time, there are a number of other issues which will have an impact on first-time buyers being able to get onto the ladder. First up, we have the end of the government guarantee which has helped act as a considerable catalyst to the provision of high – specifically 95 per cent – LTV mortgages.
High LTV products needed
At present, the number of 95 per cent LTV mortgages available on the market is relatively stable but has dropped from the peaks we saw earlier in the year. It is to be hoped that, even as the government scheme ends, lenders are willing and able to look at other private insurance/guarantee alternatives, or their appetite to continue lending in this space is maintained.
It goes without saying that first-timers who cannot rely on the largesse of a Bank of Mum & Dad need a strong supply of high LTV products in order to ensure they have the same access to the market as those who are in a more fortunate position.
And then we are rapidly approaching the point where registrations for the Help to Buy scheme will be taken off the table – at the end of October – before the scheme is finally due to end next March. This has been a mainstay of our market for a considerable period of time and will result in readjustment as industry schemes such as Deposit Unlock take its place.
Changes ahead
We hope to see more lenders who have played a full part in Help to Buy continuing to join these industry replacements and we get to a point where we can stand on our own two feet without the need for taxpayers’ money to be used in order to help people get into their first homes.
Overall, there is a lot of change coming over the next six months, and that is without quite knowing how the ‘new’ government might approach the sector. Will it move from its historical position – that of prioritising first-time buyers – or will it look at a housing policy focused elsewhere?
We await to see but, whatever happens, a strong supply of high LTV products is going to be needed more than ever as the economic headwinds we all anticipate begin to grow stronger.
