The mortgage/housing market can seem a particularly daunting one for anyone, regardless of their experience within it; however for those who have yet to purchase, I would suspect that it seems even more challenging, especially given the potential pace of change and what this can do for those home-buying plans.
For those that have been active within the market over the last decade or so, I would suggest they’d be hard-pressed to remember all the schemes, initiatives and the like which have been aimed at first-time buyers during that time. I know I can’t recall them all – some have lasted the distance, specifically Help to Buy, while others appear to have been more here today and most definitely gone tomorrow.
The differing shades of government hue during that period have undoubtedly added to the topsy-turvey nature of the market opportunities available to first-timers, but for the past few years – discounting the wider political issues – there has been some degree of certainty around what is on offer, plus of course there’s been plenty of political capital spent on looking to help more people onto the ladder.
Indeed, you might well argue that first-timers not only have certainty in terms of the political readiness and willingness to support them, but there are tangible benefits on offer, specifically the cut to stamp duty which ordinarily would not be available.
Were it only about political willingness then we might be looking at a far higher ‘run rate’ of first-time buyer action. But, might we also suggest that this is a case of at least ‘too late’ if not ‘too little? There’s no doubting that governments over the last 20-30 years have somewhat shirked their responsibilities especially in terms of developing the levels of new housing required in our market, and this lack of supply has had a crippling impact on the ability of first-time buyers to purchase a home.
The resultant increase in house prices have made that biggest obstacle – saving for a deposit – even more difficult to get over, and we’re all aware that (in many cases) without the help of the Bank of Mum & Dad, or some variant of it, then many (perhaps even most) potential first-time buyers will not get anywhere near that initial property purchase.
While prices have undoubtedly plateaued in recent months, especially in London and areas of the South East, this is not the case all around the country, and neither must we believe that prices will stay at similar levels for the medium term. The ‘back of the fag packet’ calculation tends to suggest a doubling of prices every 10 years and, reading recent research from L&C, this would put many first-time buyers beyond the ‘no stamp duty’ threshold.
Currently, first-timers don’t pay stamp duty on the first £300k of any home costing up to £500k, but the L&C research suggests that four million properties will be ‘priced out’ of this first-time buyer benefit by 2028. In other words, prices will move beyond the £500k cut-off in a decade, meaning that those who would have benefited will not do so by then.
Now, there are clearly plenty of caveats with such research – not least the fact that a great deal can change in 10 years’ time. We will certainly have a new government, we will have had a decade’s worth of continued interference in the housing market – this is inevitable – and we will also have had the most sizeable shift in this country’s standing for the best part of 40/50 years, namely Brexit.
So, it’s important to recognise that things will change, and I suspect any government witnessing fewer and fewer first-timers benefiting from the stamp duty cut, would simply up the threshold as and when required, but by the time that happens we might all be in a very different place. Indeed, government ‘giveaways’ might well be impossible especially if the Treasury coffers has taken a big hit and our housing market has ceased to function in the way we would all prefer it too.
But, the important thing here is that what seems like ‘certainty’ can be washed away pretty quickly. Plus of course the stamp duty ‘let off’ actually only saves at best a couple of thousand pounds for the individual(s) concerned; what will remain true is the difficulty in saving for a deposit. I don’t think anyone believes this is going to get any easier and therefore opening up the lending market to offer more high LTV mortgages will be a strong way of helping more people onto the ladder, by dropping the deposit threshold to a more achievable manner.
Change is inevitable – especially in the housing/mortgage markets but the market can ship to pre-empt it and keep the benefits, and of course it can develop a way of working which continues, regardless of what else happens. Access to high LTV mortgages will always be important, despite what happens to stamp duty, so it makes sense to focus on delivering it, rather than leave first-timers hostages to fortune.
Pad Bamford is business development director at AmTrust Mortgage & Credit