95% LTVs are what we need – and lots of ’em
Much is made of the generational gap that exists in both the housing market as a whole and specifically within the mortgage sector.
We are told the Baby Booming, ‘never had it so good’ generation have sucked all the equity out of the market and are currently sitting in homes that are under-utilised, while would-be first-time buyers struggle to save deposits, struggle to get mortgages, struggle to get the size of home they need and, ultimately, struggle to get on the ladder.
This is a crude drawing of the overall picture but there is undoubtedly a point to be made about an older generation that has benefited over the past few decades from house-price growth, perhaps at the expense of their children and grandchildren’s ability to secure a home.
Enter the Bank of Mum and Dad, which, if we believe L&G’s recent research, will ‘lend’ over £5bn during 2016 to its offspring borrowers.
While this will suit those with the money available to gift deposits to family members, there are still many potential first-timers who are not as fortunate. Which is why the hype around Barclays’ 100 per cent LTV mortgage appears somewhat misplaced, given that this is not a ‘no-deposit mortgage’ at all as it requires 10 per cent of the value of the property to be placed in a Barclays savings account.
So while there has been a rush of conjecture about whether this is the ‘return of the 100 per cent mortgage’ and whether more lenders will follow, perhaps we should focus on first-timer mortgages that do not require a family guarantor.
We are not even talking about the return of 100 per cent LTVs with no strings attached; instead we need to cultivate a much more competitive product sector aimed at those who can save a 5 per cent deposit – historically the product of choice to get first-timers into their homes.
Schemes like Help to Buy 2 provided a much-needed catalyst in this area but, as we motor towards its termination at the end of the year, we do not want to see a considerable pullback that leaves lending at pre-HTB2 levels.
So, rather than add to an already competitive guarantor-type mortgage sector, perhaps lenders should instead review their high-LTV deals and whether they really are where first-timers need them to be.
Richard Adams, Stonebridge Group
BTL tax grab will result in a housing downturn
The 3 percentage point stamp duty surcharge is a disastrous policy that, in time, will prove the undoing of the Tory party. The desired effects to create an orderly market will, in practice, not be achieved. Market forces are best left alone.
The buy-to-let domain for the smaller investor is dead as bigger deposits will lead to fewer people qualifying for loans. Rents will rise and, for basic-rate taxpayers, the limited company route is hardly attractive.
If the desired effect was to release more properties to ordinary buyers, in particular first-time buyers, a ban on new-build buy-to-lets would have achieved this in one swoop and prices would have remained affordable for the first-timers.
Instead, this tax grab will manifest itself in a housing downturn and hurt more people than it benefits. Please, someone, tell the Tories to reverse this before it is too late.
Mortgage prisoners are a product of fuzzy rules
Last week, Mortgage Strategy reported that the Treasury had been consulting with the industry about the best way to help mortgage prisoners.
It has been shocking how many of the bigger players have ignored the transitional arrangements and cited ‘Treating Customers Fairly’ as their reason for refusing a mortgage. “We cannot treat one client differently from another.”
This is what happens when rules are fuzzy, with no clear priorities laid down.
It has been a serious shortcoming of the FCA and its pre-phoenix entity to make vague rules and expect lenders to adhere to them.
The plus side has been to allow some wriggle room but it has too often resulted in lenders acting with excessive caution in order to avoid admonishment or, in the more cynical cases, to simply rip off the consumer or get rid of customers that they do not want on their books.