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.

Yorkshire Post - Property - - PROPERTY -

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?

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