A slumping pound, another possible base rate rise and tumbling stock markets – these are probably not the reactions that Chancellor Kwasi Kwarteng envisaged when he announced his Growth Plan on Friday morning.
However, lenders and intermediaries have given a more measured response. Firstly, a number have pointed to the fact that the Chancellor’s stamp duty cut should help to get more first-time buyers on the property ladder.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “The stamp duty cut, particularly for first-time buyers, should encourage those at the first rung of the housing ladder to take the plunge, which will be good not just for the market but for job and social mobility across the board, as well as the wider economy.”
Others agreed with this sentiment. Paul Broadhead, head of mortgage and housing policy at the Building Societies Association, said: “The changes to stamp duty will be welcome news for first-time buyers and those moving home.”
Andrew Montlake, managing director of Coreco, was also broadly supportive saying “the stamp duty change …will help many first-time buyers who have agreed prices now”. However, he also added a note of caution.
“We need to be careful that, as usually happens, house prices don’t simply rise further to eat up any potential savings and push homes out of reach for many more, especially at a time of higher interest rates.”
Affordability or rather, the lack of it
Other industry professionals picked up on this issue of affordability. Nick Chadbourne, CEO of LMS, commented that the cut may actually see affordability tighten in the long run.
“The stamp duty cut sounds like good news for homebuyers, and it is in the short term, but in the long run it may well see affordability worsen,” he said.
Stuart Law, CEO of the Assetz Group of property and financial services companies, agreed: “A stamp duty cut is going to stimulate demand further at a time when it is already vastly outstripping supply and that’s only going to send prices one way.”
He added: “The only way to truly support the housing market long term is to stimulate supply so it better balances demand, with affordability as the natural outcome.”
Supply and demand
Indeed, the dearth of supply was uppermost in the minds of most mortgage experts.
Jamie Lennox, director at Norwich-based mortgage broker Dimora Mortgages, said: “The lack of supply of houses available for sale still remains a real issue and a £2,500 saving for someone to move doesn’t seem like a huge incentive given how much more expensive mortgages have become.”
The focus on first-time buyers as opposed to others in the market would only exacerbate the supply-side issue, according to some experts.
Mark Arnold, CEO of Kensington Mortgages, said: “We need to unlock a greater number of larger homes for growing families to move into, and this first-time buyer-focused package of measures may not accomplish this. We would encourage the Treasury to look at ways to incentivise downsizing.”
In the meantime, we wait and see how markets – both mortgage and macroeconomic – react over the coming days. Volatility and uncertainty are very much in the air. At least, Kwarteng also froze the tax on beer, wine and spirits, which may be a good thing because, when the dust settles, we’ll all need a stiff drink.
