Carousel of housing ministers undermines long-term housing strategy – IMLA
Today, Michael Gove was appointed as secretary of state for Housing, Communities and Local Government, replacing Robert Jenrick.
Jenrick has held the role since July 2019 and succeeded Conservative MP James Brokenshire, who was housing secretary for a year. Before Brokenshire, chancellor Sajid Javid served as housing secretary from July 2016 to April 2018.
Davies said: “Once again, we are to have another new housing secretary, in this case a fourth in as many years. It also means we will have had 20 housing ministers since the turn of the century.
“This carousel of new ministers undoubtedly undermines the need for a long-term housing strategy and the government’s efforts to tackle the chronic undersupply of suitable housing in this country.”
The role of minister of state for housing, the post superior to housing secretary, has also shifted over the years. Currently held by Christopher Pincher since February 2020, he took over from Esther McVey who was in the role for less than a year.
Since 2008, no minister of state for housing has served for longer than two years.
Davies said this was leading to a procession of housing ministers all promising to deliver thousands of new homes a year then leaving the task to their successor after just a few months or years.
“The government must take seriously its commitment to build a better future for coming generations and to do this, we need a coherent and long-term housing strategy,” she added.
Davies also called for an independent body to take control of the housing market.
Davies said: “In the wake of the crisis, now is as good a time as any to put in place an independent housing body, which can take a longer-term view of where we need to be and how we can get there, without being constantly undermined and subjected to party political ping-pong.
“Our system of government inevitably leads to short-term administrations, and even shorter-term tenure by successive ministers. We wish the new minister well in his role – but it’s very difficult to see how he is going to make a real difference, where so many others have failed to do so.”
Government considering ‘Polluter Pays’ Bill for cladding remediation
The “Polluter Pays” Bill uses the same principle as the law for contaminated land and would allow the government to pursue remediation and interim safety costs from responsible parties in the construction industry, such as developers and builders, rather than leaseholders or homeowners.
The bill divides buildings into two groups, those that did not comply to building regulation at the time of construction, and those that were compliant when they were built but are no longer compliant following Grenfell.
This means the bill does not have time limitations, unlike current law where people have six years from when the building is built to file legal action, which will allow more mortgage prisoners access to funds.
It also works in tandem with government levies and grants, which amount to £5.1bn, and permits emergency grants to those who are on the verge of bankruptcy.
Speaking to this publication, campaigner Steve Day, who is spearheading the bill, said: “Trust in building regulation has broken down. People don’t believe buildings are built safely, so what we are saying is instead of letting the construction industry off with a tax and levy that isn’t good enough for breaking building law, the responsible parties should be held liable.”
He said that this would benefit mortgage lenders as it would rebuild trust in building regulation and compliance and went on to say that it would eliminate the need for EWS1 forms.
It also does not class mortgage lenders, or other financial services, as polluters in its bill unlike other amendments which could seek redress from mortgage lenders.
Lord Greenhalgh, who is minister of state for building safety, leasehold, resilience and emergencies and communities, said in the House of Lords: “We are very aware of the Polluter Pays Bill and the work that is being done… This is something we are looking at very carefully to see if it would further enhance the Building Safety Bill.”
He added that it was already considering extending the legal action time limit from six years to 15 years, but the Polluter Pays Bill could provide further support to ensure that it is the polluter that pays remediation.
The proposal has been greeted positively by the mortgage industry, but concerns have been expressed around how long this process will take to implement.
Robert Sinclair, chief executive of Association of Mortgage Intermediaries, said: “This proposal to resolve the issues on funding the remediation of buildings with unsafe cladding would be a significant step forward to resolving the problems facing residents. However, it will still take time particularly if ministers fail to grasp the opportunity and support these amendments.
He added: “Whilst these proposals are welcome it will take some time to avoid the need for EWS1 forms and too long to resolve the structure of many high-rise buildings. It is right that government should be funding all replacement and repairs and then recovering the cost from those they deem responsible – rarely those who currently occupy the properties.”
The Intermediary Mortgage Lenders Association’s chief executive Kate Davies said that these latest proposals could lead to “meaningful progress” to the cladding crisis.
She said: “By shifting the balance and making developers front building remediation costs, we can hold those who failed to properly construct these dwellings to account, remove the cost burden currently unfairly placed on individual homeowners, and speed up the process of remedying unsafe homes.
“This isn’t going to be a perfect solution and there will be instances where building developers cannot be found to front the costs, especially where they are no longer in operation, but it would be a step in the right direction. Any initiative that helps to ease the immediate dilemma for borrowers and gives mortgage providers the reassurance to lend on safe properties, should be welcomed.”
A Ministry of Housing, Communities and Local Government spokesperson said: “Our priority is making sure residents are safe and feel safe in their homes by removing dangerous cladding from the highest risk buildings as quickly as possible backed by over £5bn.
“We have been clear throughout that owners and industry should make buildings safe without passing on costs to leaseholders – and we will ensure they pay for the mistakes of the past with a new levy and tax to contribute to the costs of remediation.”
Mortgage advisers’ Q2 case volumes reach record levels – IMLA
Average annual case volumes rose from 89 in quarter one to 95 in Q2, marking the most borrower applications ever processed by brokers replying to the Intermediary Mortgage Lenders Association (IMLA) quarterly survey.
Between April and June, 67 per cent of cases handled by advisers were for residential mortgages, 26 per cent related to buy-to-let borrowers and seven per cent were specialist deals. The mix of cases remain similar to the previous quarter. Advisers did experience a quarterly rise in the proportion of first-time buyer cases they handled rising from 20 per cent to 23 per cent which IMLA said could reflect the growing availability of low deposit mortgage products.
The average number of Decision in Principles (DIPS) processed by intermediaries reached a two-year high in Q2, increasing from 28 to 31.
The conversion rate from DIP to completion was stable quarter-on-quarter at 43 per cent in both Q1 and Q2.
The conversion rate from offer to completion also reached its highest level since the start of the pandemic reaching 77 per cent. Application to completion conversion rates also edged up to 67 per cent in Q2 2021, compared to 64 per cent in Q1 2021. Roughly two-thirds of applications resulted in a completion in Q2, a slight increase on the previous quarter.
Kate Davies (pictured), executive director of IMLA, said: “The positive findings of our latest report clearly reflect the strong recovery seen by the housing and mortgage markets in 2021.
“This buoyancy has driven activity and helped to provide confidence to consumers and the intermediary community. As a result, we have seen advisers’ confidence levels and average business volumes increasing to some of the highest recorded.
“Of course, we may see a softening in purchase activity in the second half of 2021 in line with slowing government support, but advisers should feel spurred by the sizeable refinance market at play and a growing reliance on mortgage advice among those who have seen their financial circumstances complicated by the pandemic.”
First-time buyer numbers drop to three-year low outbid by deposit-rich
The Intermediary Mortgage Lender Association (Imla) Covid update report confirmed the proportion of first-time buyers had dropped to its lowest level since 2017, despite numbers picking up in recent months.
Landlords, those moving home or second home buyers benefited the most from the stamp duty holiday as affordability pressures pushed up the deposit and loan sizes needed to buy properties.
The report said: “By contrast, landlords have taken full advantage of the stamp duty holiday, with more than 12,000 purchases in March, the highest since March 2016.”
Imla estimates that buy to let’s share of industry net lending grew to about a third in the first quarter, its strongest showing for four years. The trade body added that 2021 will be the best year for buy-to-let lending since 2016, with £13bn of house purchase buy-to-let lending.
Landlords have also benefited from strong rental demand away from London, but rents in the capital are the most affordable for a decade.
PT versus remo
As quicker, easier transactions than remortgages, product transfers leapt in popularity in the first quarter, with a total of 324,200, up from less than 290,000 a year earlier.
The report said: “While large numbers of maturing products in the second half may slow this trend, it is clear that the current frenetic housing market conditions favour product transfers, as they can be carried out without the need for mortgage advice, valuation or conveyancing.
The trade body also observed that the current buoyant conditions in the UK housing market primarily reflect a shift in household demand prompted by the Covid pandemic, rather than the temporary stamp duty holiday. It said that while the tax break has distorted the market, it does make it likely that conditions and inflation will settle down later this year.
“But, with much buyer demand coming from older and equity-rich homeowners, there is little reason to expect a sharp reversal in sentiment or activity,” added the trade body.
The intermediary trade body has also revised its gross mortgage lending prediction upwards to £285bn, the highest figure since the market record of £362bn in 2007, but revised it down from £286bn to £280bn in 2022.
Kate Davies, executive director, IMLA said: “Following a difficult period in the wake of the coronavirus crisis, it is very encouraging to see yet another positive prediction for the remainder of 2021. Our findings forecast that 2021 will see the highest level of mortgage lending since 2007 and, with a combination of Government support helping to underpin new purchases and a bumper year for product maturities, we expect this high demand to continue.”
Find the full report and previous publications here.
Join the mortgage industry blood bank drive to help those with faulty immunities today
Blood plasma is used to make antibody medicines that save the lives of people with weak or faulty immune systems and donation only restarted in April after a gap of 20 years. At the moment the NHS relies on imported plasma medicines but there is increasing pressure on supplies.
More than 1,000 donations are needed a week and men are especially needed as donors because they are more likely to have the prominent veins required.
The industry’s blood bank is targeting 30,000 people from across financial services by 2022, and recruitment is ongoing so sign up to donate now on the website here or on the Linked in page.
Roger Morris (pictured), one of the driving forces behind the campaign, said his blood donation has already travelled from Edgbaston in Warwickshire down to Southampton.
Kate Davies (pictured), executive director at Imla, has made 91 blood donations over her lifetime. She is one of five long-standing blood donors and well-known industry names to detail their own personal reasons for regularly giving blood on You Tube, including Julie Patrick, group compliance director, OSB Group, James Chutter corporate account manager, Leeds Building Society, Emily Smith national account manager, Hinckley & Rugby Building Society and Tim Vigeon, head of lending Buckinghamshire BS.
Davies said: “We want to encourage everyone to become a regular donor. I’ve been doing it for 40 years now. I started in my last year at university after having an operation and losing a lot of blood.”
She added: “I hope many of you sign up and join the team of regular donors.”
Sign up now to become a regular donor here.
Proportunity joins IMLA
The lender becomes the 12th associate member, with Proportunity’s head of lending Matthew Froggatt acting as the firm’s representative.
IMLA currently has 44 members spanning banks, building societies and specialist lenders, alongside 12 associated mortgage service providers like Twenty7Tech, Mortgage Brain and LSL Property Services.
Founded in 2016, Proportunity provides second charge top-up loans to aspiring homeowners, which can increase a buyer’s budget by up to £90,000 and is similar to the Help to Buy scheme.
The company aims to support one million homeowners by 2030 and has helped finance 41 million property sales, according to its website.
IMLA’s executive director Kate Davies said: “Proportunity offers an innovative solution to aspiring homeowners aimed at helping them to meet affordability requirements, an issue faced by many since the introduction of the Mortgage Market Review in 2014.
“We are delighted to welcome them into membership and look forward to hearing more from the team at IMLA’s upcoming meetings and roundtable sessions.”
Proportunity’s chief executive and co-founder Vadim Toader (pictured) said: “As part of our brand journey, we are excited to have joined Imla’s membership, which will provide significant opportunity to collaborate with the wider market. We look forward to meeting with IMLA’s wider membership over the coming months.”
The only intervention the market needs is a long-term housing strategy – Marketwatch
He said decisions would rely on house price increases continuing to surpass income, favourable interest rates and high levels of transactions.
However, it was government policy such as the stamp duty holiday which has led to the arguable overstimulation of the sector.
So, this week Mortgage Solutions is asking: Is there too much intervention in the mortgage and housing market?
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries
As government has continued to support the housing and mortgage market by retaining Help to Buy, introducing First Homes and providing stamp duty reductions, the Financial Policy Committee (FPC) has retained controls over lenders to ensure the market does not overheat.
Controls on loan to income (LTI) and stressing shorter-term rates, whilst frustrating to some, do ensure affordability of individual loans and avoid some concentration risk within lenders.
We are, however, seeing house price inflation defying economic norms as both GDP and employment are constrained.
Those in work with a feeling of continuity are fuelling a housing market where there is a shortage of supply of decent stock for sale with significant pent-up purchase demand.
Indeed, with issues in the flats market, house price inflation may not be quite what it seems as only houses are really being transacted in volume.
What is certain is that with the heat in the current pricing of property it is much less likely that we will see the FPC relax its LTI or stress rate constraints.
If it did, it would feed more demand into what many see as a stretched market, particularly with the concerns over what might be happening with general inflation.
The problems created by market interventions the government introduced to stimulate the economy and provide positive consumer sentiment, need balancing controls from the FPC.
Whilst hard to explain to the consumer who wants their dream home with a mortgage that might cost less than their current rent, longer term market stability is important for us all.
Kate Davies, executive director of the Intermediary Mortgage Lenders Association
The government has provided extensive support to the housing sector since the start of the crisis, which has helped stimulate activity and boost confidence.
However, while this has been done to prevent the market from stalling, the effect has been to boost what was already quite healthy purchase activity.
One of the challenges associated with this recent intervention is how it works within the current regulatory framework.
The affordability and stress testing introduced as part of the regulator’s Mortgage Market Review requires lenders to limit the proportion of lending they conduct at more than 4.5 times an applicant’s income, and the additional three per cent stress test required by the FPC also means those purchasing a home need significant household income to access the funds they need.
IMLA and other trade associations have long argued that these measures may be too restrictive and are preventing quality borrowers from accessing homeownership.
We do know these measures are currently under review and only last week the Bank of England published a blog, in its ‘Bank Overground’ series, which suggested the stress test on borrowing could be preventing as many as two per cent of tenants from being able to buy a home.
It is hard to say whether there has been too much intervention in the market recently, or whether these actions have been a benefit or hindrance.
It takes time to understand the true impact of new policy and we will need to see how the market develops. However, changes could be made to open the door to borrowers who are perfectly good credit risks.
Regulatory changes may finetune the benchmarks above and below which borrowing is possible – but the intervention that the market really requires is a long-term housing strategy to ensure the UK builds more, affordable homes.
Richard Campo, managing director of Rose Capital Partners
Personally, I think the balance on risk and lending at present is about right.
If you have less than a 25 per cent deposit, it isn’t easy to get the lending you want if it is anything outside the most vanilla of applications.
Perhaps that isn’t a bad thing as I well remember the run up to 2007 and the lending market is not even close to what it was back then.
Policymakers need to take into account that we have had five years of suppressed activity in the housing sector largely down to Brexit, and subsequent years of delays and procrastination.
As a result, if you just look at the last six to nine months, yes it looks like a boom. The stamp duty holiday is also masking what real levels of activity are.
If you look at activity levels over the last six to nine years, you see a very different picture as house prices and lending, especially in London and the South East have been particularly suppressed.
This is particularly felt in the high-end market as many properties over £2m are either the same value or less than was the case in 2016. I appreciate that is never going to get any sympathy, but it is a reality.
So to put brakes on the market now will only hamper future and natural growth, which surely should be the aim of any government and regulator?
The move to affordability-based lending, which came out of the Mortgage Market Review in 2014 I feel is right. If we make things too tight, it stifles growth. Too loose, you create a bubble.
So maybe policymakers need to do the hardest thing of all – nothing.
Mortgage caseloads and conversion rates rise in Q1
Between quarter four and quarter one, the average annual number of cases handled by mortgage brokers rose 14 per cent from 78 to 89.
Over the same period the average number of Decision in Principles (DIPs) processed by advisers increased from 25 to 28. The conversion rate from DIP to completion also increased quarter-on-quarter from 34 per cent to 43 per cent.
The types of business being received by mortgage brokers remained constant against the previous quarter. Residential mortgages accounted for 66 per cent of all cases handled by intermediaries while 28 per cent related to buy-to-let borrowers and six per cent fell in to the specialist category.
The coronavirus crisis caused a significant drop in the quarterly offer to completion conversion rate but this recovered in Q1 from 65 per cent to 75 per cent quarter-on-quarter.
Advisers feel confident
Against a backdrop of rising workloads and an improvement in the success rate of cases reaching completion, mortgage broker optimism was high.
Some 99 per cent of intermediaries surveyed said they saw a positive outlook for their own firm while 97 per cent said they were confident about the prospects for the intermediary sector.
Kate Davies (pictured), executive director, IMLA, said: “Following a difficult period in the wake of the coronavirus crisis which led to the temporary closure of the housing market, it is pleasing to see such a positive start to 2021.
“Our findings show that after a steady period of recovery, adviser activity levels and sentiment towards the outlook for the sector are now nearing levels not seen since before the start of the pandemic. We also expect this high demand to continue into the year, with a combination of government support helping to underpin new purchases and a bumper year for product maturities also providing significant opportunity in the refinance market.”
IMLA: Mortgages outside government 95 per cent scheme may be ‘better value’
The government’s scheme went live today with Halifax, Barclays, HSBC and NatWest launching their 95 per cent loan to value (LTV) offerings – although NatWest’s range is only available direct from the lender.
Santander’s products go live tomorrow while Virgin Money will add a set of deals next month.
However, several lenders including Accord, Bank of Ireland, Skipton Building Society and Atom Bank have already unveiled offerings independent of the government scheme.
IMLA executive director Kate Davies (pictured) noted the guarantee scheme had clearly given lenders more confidence to return to this part of the market, but prices may not be comparable.
“We will need to wait to see how borrowers respond this time around,” she said.
“Price will clearly be a factor – and many of the non-government-backed 95 per cent products which have recently been launched may well represent better value for borrowers.
“There is a big role here for intermediaries to demonstrate their expert knowledge of the market and steer borrowers towards suitable and affordable products.”
At present it appears lenders are coalescing around interest rates of four per cent for their two-year fixes, with five-year versions slightly higher.
However, this may change as lenders start to compete for business.
Davies also noted there were some significant drawbacks to the scheme and so it was not a surprise some lenders had chosen not to use it.
“Many may be surprised to see that just a few lenders have said they will offer these mortgages and that some of those who have signed up have made it clear that their products will not be available for new-build properties,” she said.
“The scheme excludes applicants who have any form of credit impairment, and also lenders who securitise loans.
“When these factors are added to the additional costs associated with the scheme, many lenders are preferring to offer their own 95 per cent loan to value mortgages.”
No cliff edge ahead as 700,000 maturing mortgages will sustain business – Davies
Speaking to Mortgage Solutions, the association’s executive director said this was according to figures seen by members of UK Finance.
It was also suggested that since it had been five years since the introduction of buy-to-let surcharge in 2016, there would be a significant number of landlords looking to refinance.
She said: “There are a lot of fixed term loans due to mature in the second half of the year. There will be business going on and it will be up to lenders and brokers to attract more of that.”
With this taking place during a busy period, delays in the market could push people towards product transfers as an easier means of refinancing, Davies said.
She added: “If you remortgage you’ve got to get a conveyancer, but a transfer is quicker to arrange. We might see more of a balance between product transfers and remortgages.”
Davies said as the sector was very active, she did not suspect there would be a huge slowdown in business once the Stamp Duty holiday ended.
Referring to the association’s report The New ‘Normal’, published by its principal researcher Rob Thomas in January, Davies said the outlook remained “almost surprisingly upbeat”.
The report predicted gross mortgage lending would rise to £283bn this year, 17.3 per cent above last year’s levels with purchases driving the majority of activity. It also said gross buy-to-let lending would reach £40bn in 2021 and £41bn next year as landlords use the stamp duty holiday to expand their portfolios.
Additionally, Davies said pent-up demand, people saving money in lockdown and a lack of housing supply would not affect property prices or purchase activity.
“There’s no real sign of a dip let alone a crash in terms of prices. It’s just not going to happen, I don’t think,” she added.
Lenders looking for business
Davies said the ring-fencing policy from the Financial Conduct Authority which required banks to separate retail banking services from the rest of their business meant there was extra cash to be lent.
It was expected that much of this would be given out last year, but the market’s reaction to Covid-19 restrictions stopped that from happening.
She added: “They [lenders] want to lend it out through mortgages and we were expecting a whole load of that to flood the market with all sorts of offers. I suspect there’s still quite a lot of it there.”