"To really get more homes built and the first-time buyer market moving, there is going to have to be some form of leap of faith and some trial and error."
Around about the same time we learnt Chancellor Jeremy Hunt would no longer entertain the idea of Government-backed 99% LTV mortgages, we heard planning permissions for new homes had fallen to another all-time low - again.
Just 10,527 sites were granted planning permission in 2023 - representing a 16% decrease from 2022, a 23% fall from 2021, and only around half of the average annual permissions between 2015 and 2019.
The 2023 figure marks the lowest level for a 12-month period since the Home Builders Federation began recording figures in 2006, and currently, there is no plan - or even a plan B - regarding how to improve the situation.
If we are going to start to see building numbers go up, we need to incentivise builders to build by offering first-time buyers more help getting onto the housing ladder.
The closest thing we have to doing this at the moment is the recently launched Own New Rate Reducer scheme - offering a reduced rate for those buying a new-build property.
While any scheme that generates interest and helps first-time buyers onto the property ladder should be encouraged, I’m not convinced it is going to lead to a rapid reversal - or indeed any reversal - of the sluggish house building figures we are seeing.
The headline grabber of 0.99% rates is only being offered to those with a 40% deposit - not applicable for the vast majority of first-timers I would suggest. And while rates are still lower than standard rates the further up the LTV bracket you go, I’m not sure this will be enough to incentivise buyers on a large scale, given it will only be a couple of years before they see their payments increased to normal levels.
More needs to be done
While there were no doubt some who breathed a collective sigh of relief with the news 99% LTV mortgages had been scrapped before they had even launched, the question still remains - what now?
While there were calls to go back to the drawing board, it seems like we have already done this a number of times, with the drawing board seemingly empty.
If reports are to be believed, it was, in fact, lenders who put the brakes on the 99% LTV scheme over fears it could lead to increased defaults.
For some lenders, there may be a viewpoint of why would they potentially put themselves at unnecessary risk, especially if they are already seeing healthy lending volumes elsewhere?
Of course, not all lenders are in the same position, and one might also argue that to keep the flow of other business coming, we need to still encourage first-time buyers.
A loosening of regulation?
There was an interesting suggestion recently from the Building Societies Association. It is set to publish a report in April, which will look at the compromise between financial stability and growing the number of first-timers. The report will suggest that since the financial crisis, this balance has tilted too far in favour of financial stability.
The report argues for changing regulations to allow mortgages to be more flexible. This could include allowing more part-repayment, part-interest-only lending, with the flexibility to shift between them over the life of the loan.
It also calls for a review of the 15% cap on lending at 4.5 times income, including whether it should specifically support first-timer buyers. It’s perhaps not surprising the suggestions have come from the building society sector, which due to the cost of capital, doesn’t necessarily compete with high-street lenders in the ultra-low 65% LTV market.
For us surveyors, of course, the current legislation always works in our favour when it’s time to renew our Professional Indemnity Insurance, and we can reassure insurers there are plenty of lending safeguards in place that mean we are not going to see big increases in arrears and possessions.
On the other hand, the economy is now in a very different place than it was when a number of those rules were brought in. The question is, what would they be replaced with and how would this safeguard homeowners and the market?
It is very unlikely we are going to find a solution that appeases all corners of the market. To really get more homes built and the first-time buyer market moving, there is going to have to be some form of leap of faith and some trial and error. Unfortunately, that seems unlikely, at least in this Parliament.
