Reactions mixed after applause for mortgage move
Not all buyers will be happy with the Government’s new housing strategy promising 95 per cent mortgages. Sharon Dale reports.
A ROUND of applause greeted the Government’s bid to help first time buyers by making 95 per cent mortgages available to them.
After all they’ve been frozen out of the market by the demand for large deposits that can take years to save up.
But the devil is in the detail and the warm welcome cooled a little when it became clear that this mortgage indemnity deal will only be available to buyers of newlybuilt homes.
“It’s quite disappointing because the deal should apply to the whole of the market not just new homes,” says Hunters Property Group MD Kevin Hollinrake, who adds that even if people want to make use of the offer, there could be little or no choice of suitable new properties in some areas
“There aren’t any new build homes for first time buyers in places like York, Harrogate or Wetherby because there isn’t the land so people in those areas won’t be able to take advantage of the scheme. It’s sad but I think indicative that the new homes industry is strong on lobbying and the estate agency industry isn’t.”
Peter Bolton King, chief executive of the National Association of Estate Agents agrees and says: “We did not know it was going to be limited to new-builds. We were not consulted. We had been talking to the Government earlier about helping first-time buyers via a mortgage indemnity scheme across the whole market, so we were consulted then but not on the final outcome.
“Whilst I welcome help for the new-homes industry and am not going to knock it, the number of first-time buyers who will be assisted amounts to a pebble in a pond. We will certainly be continuing to talk to the Government about extending the scheme across the entire sector.”
York-based Kevin does admit that the helping hand is better than nothing at all and the government say that the mortgage deal, while aimed primarily at boosting the number of first time buyers, will be available to everyone except buy-to-let investors and second home buyers. But there will be a cap on the value of properties eligible for inclusion in the scheme.
“When first-time buyers on a good salary cannot get a reasonable mortgage, the whole market grinds to a halt.
“That ricochets around the economy, affecting builders, retailers, plumbers – all the people that depend on a housing market that is moving.
“If we don’t do something like this we are not going to get this vital market moving,” says David Cameron, who persuaded lenders to loosen their strict deposit rules by joining forces with developers to underwrite the risk for 100,000 mortgages.
The scheme will be available from March next year and major lenders have agreed in principle to participate. These include Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Yorkshire and Clydesdale Banks UK along with more than 25 home-builders, including the three largest Barratt, Persimmon and Taylor Wimpey.
The process for agreeing the mortgages will be the same as for any other mortgage with no equity loans or second charges.
For each new build property sold under the scheme, the home builder will contribute 3.5 per cent of the property value into an indemnity fund, with the Government contributes nine per cent.
The indemnity fund pays out to the lender if a property financed under the scheme is repossessed and there is a shortfall. Builders will take the first loss in the indemnity, with Government called on to pay once the builder’s fund has been exhausted.
The mortgage scheme is at the heart of the government’s new housing strategy aimed tackling the housing shortage, boosting the economy, creating jobs and giving people the opportunity to get on the property ladder.
The strategy also includes the following:
A £400m get Britain Building fund to help developers set to work on stalled housing schemes. This will support building firms in need of development finance, including small and mediumsized builders,
Possible 50 per cent discounts for council and social tenants under the right to buy and a promise to build a new affordable home for every one that is sold under this scheme.
Releasing more public sector brownfield land for building with a Build Now, Pay Later deal for developers. This aims to support builders who are struggling to get finance upfront.
Consulting on a proposal to review planning obligations imposed prior to April 2010. Developers say some sites have stalled because the obligations are too onerous now the economic climate has changed.
Almost £1.8bn cash to develop new affordable homes under the Affordable Homes Programme.
A new prospectus to be published inviting councils and communities to identify opportunities for large scale development. Those that have strong local support will be given financial assistance to get the work going and will be prioritised for future infrastructure spending.
There will be £30m additional funding for a custom home programme, which will fund short term project finance for selfbuilders on a repayable basis.
The Government will consult on ‘Pay to Stay’ proposals. This will mean that those social tenants on high salaries, such as household incomes of over £100,000 a year, will pay up to market rents if they want to continue living in taxpayer-subsidised homes.
Instead of the revenue generated from council housing being handed over to central Government and redistributed, councils will be able to keep their own receipts.
The strategy will also support greater investment in the private rented sector. There will be changes to the tax rules affecting bulk purchases of buy-to-let homes, as well as through measures to encourage the growth of Real Estate Investment Trusts
Housing Associations and councils will be able to apply for part of £100m of Government funding to bring empty homes back into use. The government has allocated £50 million of further funding to tackle some of the worst concentrations of empty homes. The Government is also consulting on plans to allow councils to introduce a council tax premium on homes that have been empty for more than two years, to provide a stronger incentive for owners to bring them back into use.
The Government aims to develop financial products that help older home owners safely release equity that can be used use to maintain or adapt their homes.
The government is transferring housing and planning powers from central government to councils and local people and promises to cut the red tape for house builders. Though there are fears of nimbyism, the government say there are financial incentives for housing growth through the new homes bonus, community infrastructure levy and proposals for local business rates retention.
The reaction to these plans has been mixed. Andrew Bowes, managing director of Persimmon Homes Yorkshire, says: “We wholeheartedly support today’s Government announcement regarding plans to kick-start the housing industry.
“The Prime Minister’s proposals regarding taxpayers’ underwriting mortgages totalling hundreds of millions of pounds is a radical idea and one which we believe will help first time buyers across the country make the move into their own accommodation and even support existing home owners who so far, have been unable to trade-up.
However, the Federation of Master Builders say the strategy is far from radical and only makes a small step in tackling the worst housing crisis we have seen for many years.
They add that it does little to help small and medium sized (SME) house builders who have the potential to deliver the homes that are required if the right policies and incentives were put in place.
Brian Berry, FMB director of external affairs, says: “The scale of the housing problem is now so enormous that we need to increase the supply of new homes by at least 500,000, the equivalent size of Birmingham, by 2015, if we are to meet demand. If the Government was committed to increasing the supply it would reintroduce housing targets for communities that failed in their obligation to meet local demand.
“The Government has committed to reducing the burdens on the house building sector over the lifetime of the parliament but it is continuing with expensive and complicated policies conceived by the last government during the housing boom.
“The Community Infrastructure Levy which would add £6,370 to the cost of an average sized house, and the zero carbon policy which significantly gold plates EU standards will add around £10,000 to the build cost of a home.”
HOME TRUTHS: Will the housing strategy boost the economy and the property market?