News Review: Property
The return of strong 90% LTV deals will stimulate the market • mortgage
by Nigel Stockton, financial services director, Countrywide
new figures from the council of mortgage Lenders have confirmed a marginal 3% uplift in mortgage loans for 2010. they report that 529,300 loans were advanced for house purchases, worth £77.1bn. What these figures mask of course is that the 11% increase in value on 2009 is largely due to the shift in lending to higher value properties with lower LtVs. While we all reluctantly
accept that in the current market conditions the best we can hope for is another flat year of lending in the purchase mortgage market, much has been said about lenders and the government needing to innovate. if we can’t influence the volume of loans then surely we can all work together to look at as many ways as possible to give the market what it needs.
Government powers of influence grant Shapps made the headlines again last month by admitting the average age of a first-time buyer had risen to 37 and estimated that there are now 1.4m households aspiring to buy their own homes but were unable to. in the lead up to the
government’s much-talked about
first-time buyer
summit, Shapps told radio 4 listeners that he would like to lift the current Stamp duty Land tax ‘holiday’
threshold for first-time buyers to £250,000. that would be welcome news although many would argue that to stimulate a much- needed uplift in transactions the SdLt ‘holiday’ should be applicable to all buyers. many in the industry would
also support the government if it extended the SdLt’s exempt area Policy. this would be a tactical way to stimulate house sales in the towns and cities undergoing or in need of regeneration and could potentially ease the north/south divide in house prices that is unsettling many economists. another consideration
would be to target the top lenders on gross and net mortgage lending. i would personally support this move – especially after chancellor of the exchequer george osborne recently announced that the government has put similar measures in place to increase business lending for small and medium sized enterprises by £10bn during 2011. i feel that the targets would work best if they were set at say an additional £4bn gross and net for each owned/part-owned lender. it’s a contentious area but it would give the public some confidence and transparency around the issue of mortgage lending.
Appetite for innovation Lenders will argue that there’s little they can do to increase the volume of loans this year because of their funding pressures but we should closely examine why lenders have withdrawn from the first-time buyer market for
6 mortgage introducer MARCH 2011
95% LtV products. this is the first recession since the World War that this has happened. it is far too easy for lenders to blame Basle and increased capital costs. With this in mind, i
feel lenders could look to innovate in other areas, such as: • Shared ownership on affordable homes. We recently encountered some new build schemes in London that a developer and the local authority had partnered on. their approach enabled first-time buyers and key workers to put down a 10% deposit, while the local authority owned 30%, leaving the purchaser with a 60% LtV mortgage. this arrangement helps the buyer’s affordability, enables them to access competitive interest rates and the local authority boosts its housing portfolio and stands to benefit from the long- term investment, while the developer is able to side step the chronic deposit problems many new build buyers face. i firmly believe that this could be a model to pursue around the uK and demonstrates the importance of lender, government and developer collaboration. • rolling up interest. a simple yet effective way to help first-time buyers take their step onto the property ladder would be to roll up the fees and interest for the first three-five years of their mortgage terms before moving to a capital and repayment term thereafter. Simple stepped mortgages like these could demonstrate willingness on the lenders
insurance
guarantee. as much as we all want to see more high LtV products in the market place, lenders claim that the risk associated with these loans mean that they want some extra protection and mig is therefore a viable consideration. a level of insurance cover could kick in on loans over 85% LtV and i’m keen to see more lenders and developers partner to drive this forward. • Buy-to-let: countrywide figures suggest that there were 4.5 tenants vying for every rental property across the uK during 2010. the phenomenal growth of lettings over the past three years lettings begs the question as to whether we seeing the beginning of a new long-term trend. a whole generation are now are growing up without any stigma associated with renting and for those buyers unable to buy, renting is the only option. it is a long way from a £40bn market in 2007 to a £9bn in 2010 so lenders need to support this market to ensure we have the stock levels required for this generation and beyond. new lenders are stepping forward and starting to look at pay rate and (25%) deposits for landlords – and long may good competition in this growth market continue. in an ideal world we
would have a combination of all these products on offer together with strong reasonably priced 90% LtV products. only then will first-time buyers return to the market with confidence.
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