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The Bigger Issue


Unlocking the housing There is billions in equity locked up in unmortgaged housing and yet people still


In 2011 Halifax published its comprehensive Generation Rent report looking at the housing aspirations of 8,000 people between the ages of 20 and 45. Nearly half, 46%, predicted that Britain would become a nation of renters within a generation.


People choosing to rent we said, is not necessarily a bad thing. Lifestyle choices, career flexibility and starting families later in life mean that not everyone wants to buy, let alone buy young. However, when the significant majority (77%) of the non home-owning population state that they want to own a home, we clearly need to address this inconsistency. You’ll have heard time and again that there is no silver bullet for Generation Rent, and I’ll say it again. This is a big issue and there needs to be a big effort to deal with it. In light of our survey results we pulled together an eclectic group of people from across our industry to discuss the potential solutions. Several suggested that we could unlock equity from higher up the chain to help those struggling to take their first steps in the market. The million dollar question of course is how we do this? At the most basic level, is any intervention needed from the industry? Lloyds TSB has already acknowledged with its Lend a Hand product that parents want to help their children buy their first home. However, handing over a blank cheque is not necessarily the way to do it. Maybe this is about education and encouragement for families to look to unlock equity in their homes to help their children. Perhaps this is about taking the family mortgage to the next stage. We could call for there to be an industry scheme to address this. However, for me, it’s difficult to see how we do that without willingness from those individuals in the unmortgaged properties, nor without incurring costs of establishing such a system. It’s never been easy to buy your first home and the bottom line is that we need more innovation in the market. Unlocking equity in unmortgaged property exactly the kind of “out of the box” thinking that will allow us to help first-time buyers get a foot onto the ladder. The key is that we should not focus on any solution in isolation.


Mike Jones, director of


intermediaries, Lloyds Banking Group


According to the latest CML statistics, nearly a third (31%) of UK households own their property outright.


The total stock of UK housing is 27.3m meaning that nearly 8.5m properties are equity free. HM Land Registry confirms that the average value of a house in England and Wales is currently £160,780 which, if you do the maths, means there’s an awful lot of equity tied-up in unmortgaged property (my calculator ran out of zeros!).


One obvious solution is for those with equity to help those without - the infamous Bank of Mum and Dad. There are a number of mortgage schemes, such as Aldermore’s Family Guarantee Mortgage, designed specifically with this target market in mind. The beauty of the Aldermore scheme is that it doesn’t require parents or grandparents to provide any cash up-front in order to help an offspring buy a home; they simply provide a guarantee for the amount of the loan above 75% LTV.


Buying and setting up a first home is an expensive process, which puts enough strain on a first-time buyer’s finances without the additional pressure of needing to save a large deposit. Such schemes certainly help to ease the pressure but,


regrettably, they will never provide a solution for everyone. The harsh truth is that there will always be those with equity and those without; which is why I believe we will see the UK housing market move slowly towards a more European model in which renting becomes increasingly common. The rise in buy-to- let lending is a clear indication of that trend already happening. However, I do believe there are additional steps that lenders could take to help struggling home buyers get a foot on the housing ladder. For example, too many creditworthy applicants are still being rejected by automated scoring systems when in reality they should be considered for a loan. At Aldermore, we receive plenty of perfectly acceptable applications from borrowers who have suffered the ignominy of being told “the computer says no”.


It makes you


Charles Haresnape, managing director, Aldermore Residential Mortgages


wonder how many potential house buyers don’t


bother trying again after receiving their rejection?


26 MORTGAGE INTRODUCER FEBRUARY 2012


Our experts have had their say, now it’s your turn to have yours. Visit www.mortgageintroducer.com and vote for the expert you think makes most www.mortgageintroducer.com


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