Birthplace of the industrial revolution, we’re also responsible for the invention of the telephone, television and the world’s first electronic computer.
While we can’t claim credit for inventing the mortgage (the word derives from the French for ‘death’ and ‘pledge’), we’ve certainly been among the innovators in mortgage lending.
And innovation is precisely what we need now to get the housing market moving again.
Firstly, we need some innovation from government and regulatory bodies. Project Merlin secured agreement from lenders to finance small businesses, but for mortgage lending, we need to find a solution too.
Banks that benefited from the Special Liquidity Scheme in 2008 must begin to repay funds from April onwards and are likely to find that the cost of raising replacement funds in the markets is much higher than via the scheme. The result is that credit could be restricted further and borrowing costs will rise.
What can be done by government and regulatory bodies to ensure funds are available for responsible lending to key market sectors?
It’s been encouraging to see enterprise develop ideas to help first-time buyers. House builders have devised shared ownership options or facilities to enable parents to help offspring buy their first homes. For example, Persimmon’s ‘Parent Payback’ scheme, Barratt’s arrangement with Hitachi Capital and Taylor Wimpey’s new 95% mortgage.
Lenders have also helped, such as Tipton & Coseley Building Society launching the Parent Assist mortgage, enabling mortgagors to borrow up to 100% of the value of the property, provided that a charge can be taken over a family member’s property.
All of these schemes are great innovations and help those whose families can support them.
However, what of would-be borrowers whose families are not in a position to provide ongoing support? We need to develop solutions for this group too, in response to regulatory lending constraints, or is there flex with this?
For those already in the property market, more schemes to help property owners are needed.
Lloyds TSB has launched a negative equity solution. More schemes are required to help people who need to move, whether to relocate or to accommodate a growing family, in order to restore some flexibility to homeowners whose current properties no longer meet their needs, but who have inadequate equity to move on.
Until we find some new ways to meet specific lending issues, the property market will continue in its current state.
Time to do some creative thinking…
Ross Bowen is mortgage services director at Connells
