News Review: Specialist Prime


No magic medicine to fix housing woes by Charles


Haresnape, managing director, Aldermore Residential Mortgages


as we enter 2012, the uK housing market is still hampered by the same old problems: first-time buyers struggling to get a foot on the first rung of the housing ladder, not enough new housing being built and restricted availability of funding (Kensington’s recent withdrawal of its £204m securitisation deal highlighted just how tough it is for lenders to fund mortgage lending). unblocking this log-jam is critically important, because it has wider implications than helping hard-pressed house buyers. the housing market affects so many different parts of the economy: construction, finance, retail, manufacturing....the list goes on. if the housing market can be given a much needed shot in the arm, the whole economy benefits. Which is precisely why


the government has been keen to do as much as it can to get the market moving once again. But has it done enough?


MIG scheme at the time of writing, we’re still waiting for details about the way in which the proposed government backed mig scheme will work. However, what is clear is that its success will depend on whether the regulator will allow lenders to reduce their capital requirements for higher LtV


loans and, as a result, be able to offer more competitive rates to borrowers with limited deposits. Lenders are currently required to


set-aside


significantly more capital for higher LtV loans and this has a direct impact on their cost of funds, which is why first-time buyer deals are more expensive than those for borrowers with reasonable deposits. For the new scheme to work well, the capital adequacy requirement on 95% loans needs to be the same as for sub-75% deals.


Second steppers it also needs to be remembered that, as welcomed as the scheme is, it won’t help second-time and subsequent buyers which


accounts for a larger slice of the market. the same applies to the 50% discount being offered to social tenants wanting to buy their own homes. it’s good news, but it’s unlikely to set the housing market on fire because of its restrictive nature.


SDLT disappointment unfortunately, the one scheme that the government could have retained which it has chosen not to, is the minimum stamp duty threshold of £250,000 for first-time buyers. this will come to an end in march 2012 because it is deemed to have been ineffective. i agree with the cmL


that the effect of this move will probably be to create a bunching of first-time buyer activity before the march


deadline, which may then be followed by a slump - hardly the outcome anyone wants.


No magic answer i don’t want to appear to be a kill-joy. the government has limited room for manoeuvre and can’t wave a magic wand to solve our economic woes, but it is perhaps guilty of presenting new initiatives as if they are the economic equivalent of penicillin.


Holistic treatment the harsh truth is that for initiatives to have a real impact, they need to give the whole market a boost and not just small sectors of it. regrettably, i suspect that


the housing market is in for another challenging year, despite the government’s best efforts.


mortgage introducer JANUARY 17


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