When Philip Hammond thanked George Osborne in his first (and last) Autumn Statement address, I couldn’t help wondering whether Osborne felt a pang of relief that he wasn’t up there having to deliver the OBR’s predictions for growth and debt levels in a ‘Brexit world’.
To say they were not positive would be something of an understatement, and while some have suggested they are far too gloomy and based on an unknowable future, they will still leave many people aghast at the size of the numbers and what the OBR believe to be the economic repercussions for us voting to leave the EU. It’s perhaps not surprising that Tony Blair reappeared the day after the Statement with the suggestion that people should be allowed to change their mind on Brexit having seen “the consequences” of the vote.
But back to the Autumn Statement, which appeared to be a lot less ‘dressy’ affair under Hammond than Osborne. This may be down to the content but, even so, there were no real rabbits out of hats, and we appear to have gone back to a time when all the measures announced were revealed/leaked prior to the speech. Perhaps the Treasury’s PR team wanted some positivity before the event, knowing that the OBR’s forecasts would dominate the headlines once revealed.
However, in terms of our market, there was the widely trailed funding increases for new housing supply: the Local Infrastructure Fund – £2.3bn to help deliver 100,000 new homes in areas of high demand; a further £1.4bn to build 40,000 additional affordable homes in England; and, on top of that, £3.15bn specifically for London in order to build 90,000 affordable homes. All welcome funding additions to help solve the housing supply crisis and, depending on when they can be built and ready by, will help make up some of the gap.
Rather oddly, in my opinion, Hammond also announced a major regional Right to Buy pilot for Housing Association tenants in order to help them buy their own homes. Right to Buy is controversial enough but, at a time when the focus is on adding new homes, it seems quite odd that a Government would continue with a policy which actively takes homes out of circulation. Even with a like-for-like replacement policy adopted, the net result is no change in supply, and with a Government that has said it is going to cover off all types of living arrangement – purchasing/renting/shared ownership/affordable, it seems odd to support this measure.
What we didn’t have of course was any real debate on just how individuals would be able to buy the new homes that will become available for purchase. How will the finance situation look for them? What level of high LTV mortgage lending will be available and will they be able to secure the necessary deposit levels, and meet the affordability criteria in order to secure a loan? Even with an increased level of supply, we are likely to still be far behind the curve in terms of meeting demand, so will house prices continue to rise and how will first-timers in particular be able to pay for those homes?
There was mention of both Help to Buy 1 and the Help to Buy ISA – which, rather interestingly, has been far less popular than the Government envisaged – and the continued Government support for these parts of the overall HTB ‘brand’ but I think we’re all clear that the ball lies firmly in the court of the lenders, especially given that we are only a month away from the end of Help to Buy 2. The positive news here is that HTB2 members are launching high LTV products outside the parameters of the scheme and our understanding is that there is still a sufficient, and continued, appetite to lend in this part of the market.
Hammond talked about “a housing market that works for everyone” and clearly a huge part of achieving this ambition lies with a mortgage market actively able to deliver in the key first-time buyer/second-stepper area of high LTV mortgages. Utilising private mortgage insurance is going to be a crucial part of this in order to mitigate against the perceived greater risk with borrowers who, quite simply, have never been borrowers before. Adding to the supply of housing is crucial, but we need to ensure that the circle is squared by developing product availability and lender appetite in order to get those who wish to buy into these new homes.
Pad Bamford is business development director at AmTrust Mortgage Insurance
