While we had all seen this policy kite-flying a number of times prior to recent Budgets, it looked like it had secured enough industry and public support to be deemed worthy of launching, and – we were told – HM Treasury was busy drawing up the details of the plans for launch.
The industry was split on whether it was the right move, with many torn between welcoming anything that helps first-time buyers get a foot on the ladder, while others were concerned about what such a scheme might mean for house prices, demand levels – especially compared to supply – and of course wider worries about the use of taxpayers’ money to support those wanting to get into a first home.
In the end, of course, we had nothing to worry about. Literally nothing.
Because by the time Jeremy Hunt did make his Budget speech, we had not only been told the 99 per cent LTV scheme was already history, but that pretty much anything else that had been discussed in recent weeks for the housing market – stamp duty changes for downsizers, etc – had also been jettisoned.
Instead, tax-raising had become more important than tax ‘giveaways’ – even those that might act as a considerable catalyst to activity in one of the most important parts of the UK economy, namely the property and mortgage markets.
Shifting the responsibility
So, where does that leave us?
Well, if you’re a first-time buyer, it would appear the government feels, at least to some extent, that it can only improve your lot and your access to properties if landlords and additional homeowners sell up.
It certainly doesn’t appear willing to use its considerable resources to support homeownership. While it appears to recognise there is a huge shortage of homes to both rent and buy, it’s also not in a position to actually improve this situation, almost completely reliant as it is on the major housebuilders and developers to help improve numbers.
Let’s be frank, we have a totally unfair situation following the push of a consistent message over the past 40 years or so, which has told the UK public it is their unalienable right to be a homeowner.
When you consider the alternative – renting – then it’s not surprising the heartbeat of many people is quickened by a great desire to want to own their own home. Not just because of the increased security of the shelter it provides, but moreover in terms of the cost, which right now is likely to be far less than renting for many people.
It seems a rather moot point, given no such announcement was made or indeed any scheme to support first-timers, but this is fundamentally why there was interest in a 99 per cent LTV scheme and why we continue to be supportive of schemes that might, for example, replace Help to Buy.
How to truly help potential homeowners
So, while this isn’t something we suspect this current Conservative government is going to worry themselves about, we have some advice for any future government. We sense they will be more likely to look at such schemes.
When they do, they need to draw a line in terms of who can access them and what they can be used to purchase. That is, they should be purely for first-timers and only available on new-build properties.
Broaden it to the secondhand market and you are asking for trouble and a repeat of the MyChoice HomeBuy Scheme of yesteryear, which was not so tightly controlled. That resulted in those who own already benefitting the most, not just in their ability to secure large sums of money to support their purchases, but also in the huge spike to house prices that followed the introduction of the scheme.
It’s widely understood those who benefitted most from that incarnation were existing homeowners who saw the value of their properties rise quickly and steeply, as those accessing the scheme used the money to put in larger offers for properties.
After that, we had the much more popular and successful Help to Buy. When it ended – another irony that will not be lost on anyone – it was in the right shape and format; only available to first-timers, with regional price variations, on new-build property.
It allowed many younger people to get into a new home, who would have struggled to buy otherwise, and into the areas where they wanted to live. And from that, a large number have been able to ‘caterpillar’ into a more traditional form of ownership.
A targeted homeownership policy
Any future scheme needs the parameters to be just as tight and clearly lenders are going to have to be comfortable with borrowers meeting affordability – even if it’s government-backed.
Plus of course there will be other considerations, not least setting aside enough capital to satisfy the Prudential Regulation Authority (PRA), and the still incredibly large elephant in the room, supply.
Yes, any new scheme will also need a housing developer sector willing to ‘go there’ in terms of building the homes required for the people who are going to be using it. And that, in itself, will be easier said than done.
Square those circles and have a government committed to building more affordable homes, and helping more people into them, then we have a chance. That has seemed very unlikely with the current government, and the Budget only confirmed that.
