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Market Watch: Housing agendas miss the mark

Andrew Montlake, director of Coreco

Despite the prominence given to housing during conference season, political parties offered few original solutions for long-term problems

It is political party conference season once again and housing is near the top of the agenda. Unfortunately, the ideas offer nothing particularly new or innovative.

Among other things, Labour wants to introduce a levy on second homes used as holiday homes, end letting agents’ fees and scrap laws allowing private landlords to evict tenants without very good reason.

The first thing released by the Conservatives was in a similar vein: introducing an additional tax for foreign nationals looking to purchase in the UK.

Although this could be seen as a step in the right direction, is it not just another London-centric answer to a problem that goes far deeper than simply hammering foreign buyers with extra tax?

And how confident can we be that any additional revenue raised is actually going to be used to help end homelessness? Would it really do enough to decrease house prices to a level where the majority of people can suddenly buy a property without parental or governmental help? I have my doubts.

I was fortunate enough to attend the Conservative Party’s conference to debate mortgage prisoners and affordability. There was lots of engagement, and
on both consumers’ and brokers’ side was Martin Lewis, who spoke passionately and knowledgeably about the issues.

We also got the prime minister’s speech, which, after the ‘Boris Show’, offered a more measured, down-to-earth approach. Mock the dodgy dancing and half jokes about coughs, but she did OK considering the huge pressure she is now under. She also took the opportunity to announce one of the biggest changes – scrapping the cap on councils borrowing against their housing revenue account. Hopefully this will help in hitting the ambitious build targets in which local councils should play an important part.

It is crazy to see reports of councils spending £300m on hotels and B&Bs to put up homeless people over the past three years. Surely it must be better to build more permanent social housing? Forty years ago, there were six million social homes in the UK. Today there are just over four million, but the population has grown by 10 million. Something is very much amiss.

It does seem like construction is slowing again, with builders fearing they could be putting more homes up than will sell at the levels they want. According to the Ministry of Housing, Communities and Local Government, there are 21 per cent fewer homes being built in England compared to the peak of 2007.

Elsewhere, it was interesting to see Citizens Advice make a ‘super complaint’ – the first in seven years – to the Competition and Markets Authority, as it believes loyal customers are being exploited to the tune of £4bn per annum.

This includes those in markets such as mortgages, mobile phones, broadband, home insurance and savings, where existing customers pay more for loyalty.
I have never understood this. In my book, loyalty surely means a better deal? I look forward to seeing where this goes.

In the markets, three-month Libor has moved as much as Brexit negotiations (i.e. nowhere), still sitting at 0.8 per cent, while swap rates have tweaked up a notch.

  • 2-year money is up 0.03% at 1.15%
  • 3-year money is up 0.04% at 1.27%
  • 5-year money is up 0.06% at 1.43%
  • 10-year money is up 0.08% at 1.65%

Although it seems to be quite a tough market at the moment, it was good to see mortgage approvals back at their highest monthly level since January in August, according to the Bank of England. There is business out there to be done but I have certainly noted some prospective buyers adopting a wait-and-see approach as we get closer to the key Brexit dates.

Remortgaging is still strong, of course, while product transfer business is having a pretty transformational impact on the market. The advised share of this business has increased to £31.2bn, or 57.9 per cent of the market, but whether this is sustainable before tech takes over remains to be seen. The question is, how long do brokers have to make the most of it?

In the mortgage world, we are still waiting to see some real innovation. Let’s face it, the products that were around 20 years ago are still the same sort of products around today. Where are the new breed with flexibility to meet certain life events and so on?

Accord has continued its good form of late with its new build proposition. It will lend 90 per cent loan-to-value on new build flats and accept 5 per cent incentives. It has no maximum on number of storeys but does have some sensible requirements where ground rents are concerned. It has also launched into Help to Buy.

BM Solutions has removed its mortgage account fee and now has a flat level one valuation fee of £300.

Bank of Ireland has launched a five-times income multiplier for high earners from £75,000, which is a nice improvement. It is also worth checking out its affordability calculator.

Meanwhile, Paragon has released some decent research showing the average market value of a landlord’s property portfolio has reached £1.7m – some 6 per cent higher than the pre-crisis peak.

Just over one in 10 landlords (11 per cent) say they feel optimistic about the prospects for their property portfolio over the next 12 months, and twice as many (21 per cent) expect to sell some of their buy-to-let properties than those who expect to buy (9 per cent).

Unsurprisingly, more landlords expect to see a slight drop in their portfolio value over the next 12 months than those who anticipate an increase.

Finally, it will be interesting to see what comes out of the upcoming FCA review of a small sample of master brokers in the second charge market. This is an emotive area for many and I hope we will see a shared sense of best practice from firms.

Andrew Montlake is director of Coreco

You know what really grinds my gears?

After the Mortgage Market Review, there was a promise no one would be adversely affected by the changes in affordability. Rules were brought in to ensure this would be the case but they have been ignored by lenders unwilling to take on other people’s risk. As mortgage brokers, we can obtain five-year fixes from around 1.84 per cent, yet people are paying substantially more.

Last week, around 6,000 more borrowers’ mortgages were sold by the government to ‘lenders’ that cannot or will not offer another rate. As Martin Lewis argues, the interpretation of the Mortgage Credit Directive is surely just that: an interpretation.

There is also another one, that borrowers who have consistently proven their creditworthiness should have proved affordability enough to justify obtaining rates that would reduce their outgoings substantially. When rates start to rise, borrowers without the protection of a fix will start to really struggle.

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