Who is the party of the first-time buyer?
Is it the Conservatives who, let’s be fair, have prioritised first-timers over the course of the past decade, introducing a series of schemes and measures designed to help individuals onto the ladder? But then you might argue that it has done little to confront house price levels in terms of getting them to more affordable levels.
Or is it the Labour Party who prospered so much at the last General Election from the ‘youth vote’? A recent report, commissioned by Labour, entitled Land of the Many would seem to herald a continued focus on the helping of first-timers should Labour form the next government.
Maybe in a very uncertain environment we need to take more notice of the Liberal Democrats, the Green Party and the SNP, who could very well hold all the power cards should Labour – or any other party – need them to help secure a coalition and get them into power.
If that holds true, it’s likely that any of those three would be wanting to row back on support for first-timers; again, you might suggest that private sector landlords could continue to suffer if there is a continued approach which somehow blames them for the lack of first-timers on the market.
Certainly, reading Land of the Many that is a strong argument that continues to be made. That it is effectively landlord versus first-timer buyer and the environment has been in favour of the former rather than the latter for far too many years. The fact that we have had a government which has also espoused this and put into practice many measures designed to lessen the ‘power’ of the landlord, appears to have been over-looked by the report’s authors.
Nevertheless, the overwhelming direction of travel looks like being in favour of first-timers and securing them their position on the housing ladder. As a business which offers insurance products to lenders in the high LTV space, which are predominantly taken up by first-time buyers, you might think this would be music to our ears.
After all, if lenders are put under increased political pressure to offer loans more suitable for first-timers then you might think that this could result in lenders seeking to mitigate any perceived increase in risk that these types of borrowers could represent, and they would be more likely to want private mortgage insurance in order to cover their activity in this area.
That may be a natural move for some, but our experience is also that lenders – even with the use of private mortgage insurance – will only want to conduct a certain amount of high LTV business. Indeed, there are rules in place to stop them doing more, while at the same time we’ve recently had the PRA expressing concern that lenders are beginning to conduct more riskier business and that it should be ‘watching them like a hawk’.
So, marrying up political will with regulatory prudence could mean that the espoused will of our political leaders might not fully chime with the responsibilities lenders have in this area. Plus, of course, there is a very good argument about not decimating the private rental sector, and landlords’ place within it, for an unachievable goal. Is there really a like for like situation here? Does every landlord seeking to sell their property end up selling it to a first-time buyer? Of course not. This is not a zero sum game and it causes real problems for the overall health of the UK housing market to treat it as such.
This in essence is another plaintive cry for ‘joined-up thinking’ – for an understanding from our political leaders that we need all parties engaged but also all parties aware that the market they think exists, might only do so in theory. That, while we would all like lenders to carry out more high LTV business for lenders, there are regulatory restraints in place, plus we have a regulator or two who is very concerned about standing back from the mortgage market and effectively condoning Credit Crunch part two.
Plus, add in major issues such as housing supply, planning, development, social and affordable elements, plus financing, and the concerns of individuals themselves in terms of the finance they can muster and the mortgages they need, and you can see why this has to be looked at in the round.
Of all the political ideas of recent years a stand-alone Ministry of Housing seems like a good one. Perhaps whoever ‘has a go’ at sorting out the UK housing market next could start from here and be given the necessary powers to ensure that all sectors are taken into account and taken care of. Then, we might begin to build a sustainable and workable market for all.
Pad Bamford is business development director at AmTrust Mortgage & Credit