UK government’s comprehensive review of the mortgage market: industry reaction

British Prime Minister Boris Johnson’s speech earlier today announced new measures to help more people get on the property ladder, including a comprehensive review of the mortgage market, but the new proposals have not been well received by industry players.

In his speech, the Prime Minister set out the government’s commitment to reversing the downward trend in homeownership rates.

This comes after the proportion of 25 to 34 year olds who own their homes fell from 55% to 34% between 1996 and 2016.

Johnson also confirmed his ambition to “unlock the opportunity for homeownership” for more people through the right to buy.

The Prime Minister also pledged to help those who are able to buy, to access the mortgage finance they need, to ensure that people are encouraged to save for a deposit, regardless of their financial situation , and to improve the supply of housing across the country.

Commenting on the proposals, Coreco chief executive Andrew Montlake said: “The benefits proposal is a bit left wing and I’m not sure lenders will like it. The use of benefits, particularly housing allowances or Universal Credit, is not ideal for grounding a mortgage and even if used is unlikely to increase borrowing eligibility enough to make a big difference.

“In terms of the new right to buy scheme, that may help some, but it’s a bold assertion that every house sold will be replaced by another to ensure that social housing does not shrink further. Given that the government has failed to come close to housing construction targets, this seems like a big ask.

Meanwhile, Shaw Financial Services founder Lewis Shaw described the Prime Minister’s announcement as “the ultimate political meringue: soft, light and with very little substance”.

“Ownership levels are lower today than they were in 2010, and we know that large swaths of the right to buy homes have ended up in the hands of private owners. We don’t need more right to buy schemes; we need to build more homes and reduce the cost of buying and owning a home. Talk fiddle while Rome burns,” comments Shaw.

Also reacting to today’s announcement, Quilter’s mortgage expert Karen Noye said the Prime Minister ‘has tried to persuade the public to drop the ‘partygate’ scandal by announcing a series of new housing measures”.

“One of those announcements was a review of the mortgage market, which will be reported in the fall. However, the details of what this actually means remains to be seen. By his own admission, there is a Healthy supply of high value mortgages available, so what this review will reveal is anybody’s guess.

“The crux of the matter is that it is not the mortgage industry that needs fixing, but the housing market and its exorbitant prices. Part of the reason house prices are soaring is that there are so few properties out there. Build more stock and the rush for properties, which drives prices ever higher, will stop. This would in turn help the rent generation whose dreams of owning a home are sadly just a dream right now.

Last month it was revealed that the UK government was preparing to offer English households who rent properties from housing associations the option of buying them at a reduced price.

The proposal aims to give the 2.5 million households in England who rent properties from housing associations the power to buy their homes at a reduced price.

The proposals are said to have been inspired by Margaret Thatcher’s scheme, which was launched in 1980 to allow families to buy council houses.

Noye explains: “Time and time again we have seen government housing programs fall very short of the mark, however well-intentioned. A good example is Help to Buy, which for some was disastrous and helped line the pockets of homebuilders while not helping as many people as hoped.

“Johnson may be lucky and prices will go down regardless. The nation is facing a dire financial situation with rising inflation and rising interest rates as a result. All of this could ultimately cause real estate prices to fall on their own,” she adds.

Commenting on the promise of an extension of the existing right to buy policy to those who rent housing association properties, Leveling Up, Housing and Communities (LUHC) committee chair Clive Betts says: ‘The Prime Minister must clarify that if the government presses before extending the right to buy to social housing tenants, it is essential that money flows back into the social housing system so that new homes can be made available for rent and low cost purchase.

“The success of an extended right to purchase policy will surely depend on the replacement of the houses sold and the maintenance of the housing supply. I hope the government will explain how this policy will safeguard the supply of accessible and affordable housing, especially affordable rental housing. »

“It is important that the government presents more details on this housing policy to support the words of the Prime Minister. The right to buy extension will not be a free policy, so it is essential to have more details on how this is to be financed and how it will cover the costs of building new houses. Those who need low-cost housing should not pay the price for this policy. The government should commit to ensuring that existing social housing is replaced on an identical basis – a house sold should not be replaced by an apartment.

“The government will also have to explain how it will overcome the legal hurdles of forcing housing associations, which are independent bodies, to sell their assets. The Government should also indicate whether it intends to require the agreement of housing associations for the implementation of this policy.

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