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Opinion: Market too reliant on Bank of Mum and Dad

Pad Bamford

Looking at the latest house price figures from Nationwide for July, it’s clear there is an air of stability but with the added caveat that no-one quite seems to know what might happen, particularly in the medium-term.

Certainly, supply shortages are ‘providing support’ to UK house prices but there is a concern about dropping housing transactions and mortgage approvals. The annual inflation rate of 2.9 per cent looks just as likely to slip further, which, for all the gnashing and wailing it might provoke, may actually provide a degree of succour to potential purchasers, specifically first-time buyers.

That said, the average price of a UK property remains at £211,761, which requires a £20,000-plus saving to secure a 90 per cent LTV mortgage, or just over £10,000, providing of course the borrower is able to get their hands on a 95 per cent LTV loan, which do not appear to be in abundance.

In a very real sense, house prices keeping an even keel for some considerable time may not be unwelcome. Compare and contrast to Ireland, where S&P expect prices to increase by 8.5 per cent this year, followed by 7 per cent next year.

The rating agency puts this down to shortage of supply, no change to the UK, but also a ‘continued economic recovery’.

The difference to the UK is quite palpable here – S&P expects UK house prices to fall by 1 per cent next year due to factors such as Brexit.

But then again, the fall doesn’t seem too hefty and perhaps could be accepted by existing homeowners as a short-term ‘blip’, at the same time as it hopefully puts houses within the reach of first-timers.

Of course, that will be dependent on mortgage availability and time and time again, first-time buyers can often seem at the back of the queue for this, unless of course you have kindly parents or benevolent relatives to help you out.

How long can this be sustainable? I think it would be far better to develop a mortgage market which meant new buyers didn’t have to rely on their elders to support their ambitions.

Perhaps a period of very small house price growth might just be beneficial to all and the ‘new normal’ might provide more opportunity for many more first-time purchasers – mortgage lending permitting of course.

Pad Bamford is business development director at AmTrust Mortgage & Credit

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