Housing is likely to provide a major battleground in this May’s General Election and all political parties will be hoping to win favour with existing homeowners as well as wooing the potential first-time buyers who want to join them on the property ladder.
The Coalition has introduced a variety of measures intended to stimulate house building and assist aspiring homebuyers, including Help to Buy and the Autumn Statement’s stamp duty reforms, with further proposals such as the Starter Homes scheme planned.
As the election draws near, the other main parties will be sharing their ideas for how to make up the current housing shortfall and enable voters to secure the home they want.
Lenders have an opportunity to support homebuyers as part of Government initiatives but also through their own innovation and creativity in developing products and lending criteria to meet the needs of more borrowers, particularly in underserved markets.
As the gap between average salaries and house prices remains high, particularly in London and the South East, we can expect to see more use of measures such as shared ownership to enable First Time Buyers to realise their property-owning dreams.
As part of efforts to secure more affordable housing, we can also expect to see greater use of Section 106 Agreements by local planning authorities to impose maximum salary criteria for new-build buyers. Although the number of properties affected by s106 Agreements is likely to rise, this market is one which is currently under-served by lenders.
These measures are most likely to be seen in London, where activity in the housing market has been stronger than elsewhere in the country.
House price inflation in 2015 is likely to be more modest than it was in 2014, when strong market activity in the early part of the year may have been the result of pent-up buyer demand which has now been satisfied. However, homeowners may take the opportunity to remortgage to a more competitive deal while the current low interest rate environment continues.
As 2014 progressed, the chances of a rise in Bank Base Rate from its historic low moved back from the latter half of 2015 into early 2016, partly because of subdued annual wage growth and low inflation forecasts. Combined with increasing competition as more lenders enter the mortgage market, this should mean that brokers and their clients can continue to take advantage of low rates.
The extra competition may also provide brokers with the opportunity to promote remortgage business, although should the Base Rate remain low for longer homeowners may feel less compelled to switch to a new deal.
It’s been almost 12 months since MMR, the biggest overhaul of the mortgage market in 10 years. Affordability assessments standardised through MMR are intended to prevent the kinds of excesses seen in the mid-2000s, while reviews of outgoings as well as income should improve the customer outcome through more fully-advised mortgage interviews and processes.
As the first anniversary of MMR approaches, it will be interesting to see how the new regulations have bedded in and whether the regulator feels it necessary to provide lenders with extra or amended guidance now it has seen how the rules have been working in practice.
