the Power hour
is that because We haven’t got an objective of What We Want the housing market to look like and We’re just chasing our tails? Gary Styles: It could be partially. We all know the structural market issues given, we’re not building enough for the household sizes going forward. That has been the case for as long as I can remember. What we’re discussing here is how do we do something in this recession that gets us out of the hole? The whole recession situation in Europe is hitting all markets in the UK. The housing market isn’t different from any others. SE: In certain areas the market is slowly responding. Almost the new first-time buyer is actually the private rented sector today where there is a lot more availability today and the criteria is slightly loosening as the market becomes more competitive in the buy-to-let sector. Santander has been very clear about entering that market, I think it will be at the end of Q1 next year. It’ll be a very significant move.
Will firstbuy, shared equity schemes and innovation from firms like castle trust make any difference to floW in the housing market? TW: No. What Castle Trust is looking at is not new. It’s been tried in different and many forms. The one that was famous was a version of the Shared Appreciation Mortgage that we all know and there were lots of issues with how that was sold. So I’m somewhat sceptical about it. It’s complex, it’s a complex sell, it’s not really for everyone in fact I think it’s a niche market by definition. It’s got the ability to be mis-sold and mis-understood. You’ve got to have 20% equity of your own minimum in it and you get 60% of any
than see it go down so either house prices correct or you look at how to unlock that. It might be that grandma and granddad might be willing to unlock equity to give some type of guarantee to the lenders and we’ve seen some of that come out to the lenders with the likes of Aldermore and others. So I think that has more legs than Castle Trust because there’s real cash there and it’s not difficult to understand.
uplift in capital value but you pay 80% of any fall at the point of sale. So on that basis it’s quite a hard sell and I think that’s one that will be subject to a high level of scrutiny from the regulator as well in my view. I’m not saying it’s a bad thing at all. It’s more complex, it’s innovative and by definition a very small market. AC: One of the things you could look at on a philosophical basis is that we’ve had our kids’ equity. I’m in that segment of people that probably have had our children’s’ equity and there’s about £800bn of equity locked in sitting right there. We’re doing nothing with it other
Would you do that? AC: If push comes to shove and it was the only way my children could get on to the housing market, that’s probably what I’d do, I’d take a punt with my equity. They’re going to get it anyway at some point. TW: My belief is that finally everything is now set up for equity release to come out and be successful. This could be one of them and another is when you look at the amount of interest-only loans sold without a repayment vehicle. How can that be dealt with? Well I think it will be some form of equity release. GS: The big problem with equity release for me is trust. In the current environment banks are not actually that high on the list of being trusted animals in terms of launching new innovative schemes which involves exposing yourself to some future cost lined up or otherwise. TW: Shared equity type deals have a similar record as well. I actually think they were a clever idea but when Bank of Scotland and Barclays did them they got pilloried in the press for ripping people off. I didn’t think they were ripping people off at all. AC: If you look at the age of the people who bought that product, equity release and that Shared Appreciation Mortgage generally sold to old people whereas I think that a lot of equity release now you’re looking at is for people 20 years younger than that.
Follow us on Twitter @mortgagechat 38 mortgage introducer DECEMBER 2011
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