"We can’t underestimate the importance of the lending community providing a raft of low-deposit mortgage options."
We couldn’t really begin without talking about the General Election, and the potential it has for transformative change – or not as the case may be – within the UK housing and mortgage market.
While – as I write – we have yet to see any of the major party’s manifestos to read the detail of what policies they are putting forward to help first-time buyers in particular, the ‘wish lists’ are already appearing from market stakeholders, not least those who are most deeply impacted, would-be first-time buyers themselves and those groups who represent them.
So, what is making up the items on those ‘wish lists’ for the first-time buyer market? Well, one would think, calls to make the current stamp duty exemption on properties valued up to £425k, permanent in both England and Northern Ireland. This is currently due to finish in April 2025.
Other suggestions focus on a regional variation for stamp duty, which would clearly impact the entire market, but one wonders if this might be deemed too complicated to enact. I suppose, the next Government could remove stamp duty entirely given there is evidence to suggest this would actually bring in more taxes to the Treasury, and boost economic activity in this country, by removing that burden and focusing on growing the number of transactions.
In our specific space, there will continue to be calls for more Government schemes to help first-time buyers, and potentially a replacement for Help to Buy, however we would much prefer the next administration to put its full backing behind the private schemes already up and running, such as Deposit Unlock, because then you would not be spending taxpayers’ money, but with a considerable boost, you could get to the same results.
Encouraging more lenders to get involved would be a start, and clearly there needs to be even greater levels of buy-in from developers, and right across the board, there needs to be a renewed focus on increasing supply. The positive here is that we do have schemes ready and available, they simply require greater levels of participation and then we can really begin to see them take off.
On those and other issues, I think we are all waiting to see what the parties have to put forward, but one final thought – as we know, many would-be first-timers struggle to save the required deposit to get on the ladder, and therefore we can’t underestimate the importance of the lending community providing a raft of low-deposit mortgage options.
We have started to see some very small movement upwards in the number of lenders offering 95%-plus LTV products, but clearly more could and should be done; again if the Government (and the regulators) do want to help more first-time buyers they should be looking at the ways and means by which lenders are currently curtailed in offering higher LTV products.
Talking of which, each month I look at the number of 95% LTV products available to first-time buyers using the Nationwide’s average monthly house price figure. For May this was £264,249, giving a 5% deposit figure of £13,213. Both figures slightly up on the previous month.
Again, it’s a positive increase on last month’s figures with 239 products (up from 227 in May) currently available, and split between 207 fixes and 32 trackers/discounts. All that increase has come from fixed-rate products however it is noticeable that the pricing of those products has continued to rise in many cases, with a number of lenders pulling their more competitive offerings over the last month.
The top five-year fix still remains the Northern Ireland-only Progressive Building Society, but last month this was priced at 4.8%, and this month it is 4.99%; the Scotland-only Scottish Building Society has a product priced at the same amount, while the Family Building Society’s 4.89% product has gone and it’s best offering is now 5.09%.
In the two-year fixed space, Scottish Building Society’s Scotland-only product remains top at 5.39%, while the Progressive’s product has gone from 5.45% to 5.55%, and sandwiched in between is the Lloyd’s 5.52%, which last month was at 5.49%.
Finally, in the variable/discount/tracker product space the Loughborough’s three-year discount remains at 5.15%, the Vernon Building Society’s lifetime discount also remains at 5.4%, while the Newbury Building Society offers a three-year discount at 5.44%.
With the market having seemingly pulled back from a June cut in Bank Base Rate, and swaps reflecting this, it now appears much more likely we won’t see any action from the MPC until August or September at the earliest, and therefore we might well anticipate rates will remain similar to the above over the summer period.
However, June is likely to be a very eventful month for all manner of reasons, and the first week of July will provide us with a raft of answers about who will form the next Government and what impact this is likely to have on our mortgage market but also first-time buyers specifically.
The tension is already ramping up and is only likely to get greater the closer we get to July 4th – we should perhaps all hang onto our hats over the weeks to come.
