Political flux and government intervention make nervous borrowers – Nigel Payne

by: Nigel Payne, managing director, TFC Homeloans
  • 30/05/2017
  • 0
Political flux and government intervention make nervous borrowers – Nigel Payne
News from the Council of Mortgage Lenders that lending fell by a third in April compared to March probably won’t have surprised many of us operating in the mortgage market.

At TFC Homeloans we’ve seen a noticeable bounce back in May, which is hopefully reflected across the industry.

But the overall trend is one of barely rising volumes over the last year. The CML figures point to strong first-time buyer and remortgage activity but a marked slowdown in homemover and buy-to-let business.

Lack of confidence

The political instability surrounding Brexit and the steady stream of elections is bound to make homeowners cautious about moving, especially where it involves taking on more debt. Added to that is the supply issue, which leaves slim pickings for existing homeowners looking at moving options.

It’s understandable that many are reluctant to move and, until there is some certainty in the political arena, or a boost in supply of available property, it’s hard to envisage a surge in this sector of the market, especially as we head into summer.

Buy-to-let bust?

The buy-to-let slowdown is a different matter altogether, caused by direct market interventions by government and regulators. The Stamp Duty surcharge had the biggest and most noticeable impact, but the cumulative effect of income tax changes, tweaks to the wear and tear allowance and PRA rules have chipped away at the profitability and attractiveness of investing in property. That of course was the intention.

In fact, buy-to-let purchase activity has halved since the period before the Stamp Duty surcharge, says the CML.

On the positive side buy-to-let remortgaging is strong and at TFC we expect it to remain strong this year, with many deals up for renewal over the next six months. But it doesn’t plug the overall buy-to-let shortfall.

The bigger picture

Because housing is so ingrained in our national consciousness and perception of wealth, lower sales and stuttering prices feed into an existing cautiousness over Brexit and the economy. It means the landlord decides not to invest in the new carpet and kitchen, and the family opts against the loft conversion or the new car, because they are wary of spending in what feels like a time of flux.

This lack of confidence means less money flowing into not only mortgage-related businesses – the surveyors, conveyancers, removal firms and furniture shops to name a few – but the wider economy as a whole. This month the Office for National Statistics ONS revised its estimate of growth in UK GDP during Q1 downwards to just 0.2%.

Whatever shape the government takes on 8 June, I hope it demonstrates a long-term commitment to the housing market, and looks carefully at mortgage volumes across all sectors.

Renters, landlords, homeowners and first-time buyers need to feel confident and secure about the wider economy to take large financial decisions and make their next move.

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