While the chancellor’s speech lacked the news we were hoping for, the Red Book offered more promise for the housing market.
I always look forward to the Budget. I know it is a bit sad but I love the way the whole thing plays out; the jeers and ‘hear hears’, even the lame jokes. There is something theatrical about the whole package.
That said, the latest episode was an hour and a bit of my life that I will not get back, as all the promises around housing being the centre point faded into blandness.
As the chancellor himself said, most of his ‘star bunnies’ had already been released, so the biggest announcement from a housing point of view was around stamp duty for first-time buyers.
Last year, Hammond raised the stamp duty threshold from £125,000 to £300,000 to help first-time buyers, and this will now be extended to cover those purchasing shared ownership properties up to the value of £500,000. This will be applied retrospectively, to match up with the previous changes.
As usual, of more interest than the speech itself was the accompanying Red Book documents detailing further changes.
It was inevitable an extension to Help to Buy was going to be made, given the reliance on the scheme initially meant to be a short-term fix.
A new scheme will be introduced from March 2021 for two years. It will follow the same basis as the current scheme, with two important changes: it will be available for first-time buyers only and for houses with a market value up to new regional property price caps. These caps are set at 1.5 times the current forecast regional average first-time buyer price, up to a maximum of £600,000 in London. It is hoped these changes will go some way to alleviate criticism that the scheme helps artificially increase house prices and line the pockets of builders. The statement that there is no intention of introducing another scheme after March 2023 gives notice to the industry that it needs to start weaning itself off this particular drug.
It will be interesting to see whether mortgage lenders will be prepared to lend up to 95 per cent loan-to-value on new builds in the future.
Also found in the Budget documents was more information on proposed increases in tax for foreign buyers. HM Treasury says: “The government will publish a consultation in January 2019 on a stamp duty land tax surcharge of 1 per cent for non-residents buying residential property in England and Northern Ireland.”
There was another proposed change to landlords and lettings relief on capital gains tax as well. The documents stated that: “From April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption will also be reduced from 18 months to nine months.”
Of course, there were the usual items around tax and investment, too. Thankfully beer and spirits are not going up.
Perhaps the chancellor left himself room to change all of this next year, hinting the Spring Statement could become something more depending on whether a deal can be struck with our EU brethren or not.
The big question is whether this was actually a pre-election Budget, with whispers continuing about the possibility of Prime Minister Theresa May calling a snap General Election to try to reassert her authority. I am not sure that would be the best idea.
Elsewhere, the Letwin Review of build out is worth a peruse. Criticism comes the way of builders for building too much of the same type of properties, suggesting new planning rules for sites with more than 1,500 homes.
In the markets, three-month Libor has tweaked up by 0.01 per cent to 0.81 per cent, while swap rates have drooped downwards.
● 2-year money is down 0.04% at 1.11%
● 3-year money is down 0.08% at 1.19%
● 5-year money is down 0.09% at 1.34%
● 10-year money is down 0.1% at 1.55%
Product-wise, a few lenders tweaked rates upwards slightly. Whether we will see them come down again now swap rates have eased a touch remains to be seen.
Nationwide has made some significant rate changes at 95 per cent LTV, reducing them by up to 0.5 per cent. It has also increased the maximum loan size for 95 per cent LTV to £500,000, and increased the maximum LTV for remortgaging with additional borrowing to 90 per cent LTV.
Barclays has announced a simplified process to extend a mortgage offer on new build properties, enabling clients to request a new offer on the same terms (including product) at any time, while the current offer is valid as long as there has been no material changes. Very useful.
It is also working hard to make applications easier and, for buy-to-let clients, is removing the need for assured shorthold tenancies and the latest lenders’ statement to be submitted for any background mortgaged properties. Self-employed clients will now only need to submit the latest year’s full financial accounts, which no longer need to be signed.
Santander has launched into the underserved Help to Buy remortgage market with products up to 90 per cent LTV. It just needs to continue to work on getting its service back up to where we know it can be.
Meanwhile, Natwest has reduced the minimum rental coverage ratio from 125 per cent to 100 per cent for customers whose total personal basic income is at least £75,000 per annum.
Finally, the technology battle continues apace with the launch of Molo Finance, a new digital lender whose aim is to offer approved mortgages in just 15 minutes. And on this note, Lloyds Banking Group is finally launching its open banking proposition this year. We wait to see what this will look like and what it means for consumers.
Andrew Montlake is director at Coreco
You know what really grinds my gears?
I enjoyed taking part in an interesting Mortgage Strategy Wired live TV debate on protection the other day and learned a lot from the others on the panel. It is a pretty emotive subject. Why are sales decreasing? Have brokers lost the art of the sale?
Yes, many advisers need to be better at this as a duty of care for clients. We have to at least mention it and pass over to a protection specialist if we are not prepared, or do not feel confident enough, to do it ourselves.
But I do not want to hear from insurance companies that it is all our fault. For me, the whole nature of the industry needs to change: the way the products work, the costing, the commissions, the marketing, the lot. Consumers are changing and, with a few exceptions, insurance companies are not.
We must address this together to ensure there is a new breed of relevant, understandable and affordable products for the future.