Shapps calls for canny lenders to test market
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The housing minister called on ‘canny lenders’ to come forward and create more long-term, fixed-rate mortgages to give borrowers more stability to plan for their future.
Speaking at a conference hosted by the Building Societies Association in London, he said: “Changing lending practices can make the world of difference to first-time buyers.
“Longer fixed-term rates provide peace of mind and many people would find this helpful to plan their finances during these turbulent times.
“The longest fixed-rate mortgage at the moment is 10 years for this country, but if you look at Germany, lenders are offering products that are 25 years long. This shows there is a gap in the market. If canny lenders test the market, this could unlock the housing market.”
Paul Broadhead, head of mortgage policy for BSA, said: “We welcome the prospect of an inclusive debate on any measures which will help lenders lend and consumers borrow. We also endorse the government’s aim for a stable and we presume active housing market.
“Longer-term fixed-rate mortgages have been offered, but with limited consumer demand. Ten-year rates are currently available and lenders do respond with products where demand exists.”
The minister also used the speech to say there was ‘a role to be played’ by mortgage insurance in achieving a balance between FTB access to the housing market, and prudent lending.
Angel Mas, president of Genworth’s European Mortgage Insurance business, said: “The comments are another stepping stone towards mortgage insurance being accepted as part of the solution to the first-time buyer challenge.
“There is a need for a clear regulatory framework that incentivises the use of mortgage insurance with high loan-to-value mortgages.
“As Mr Shapps referenced, in the good times, lenders are happy to write as many high LTV loans as they can, effectively competing on risk. But as the cycle turns, the availability of loans, understandably, reduces.”
Dan Clayden, director of Devon-based IFA firm Clayden Associates, said: “Having greater stability in knowing how much you will pay over the longer term sounds great.
“However, the reality is if people had taken out a long-term, fixed-rate mortgage before the financial crisis hit, they would still be paying an arm and a leg for their home instead of benefiting from the drop in interest rates.
“The past shows that people who tend to go for fixed-term rates always end up paying more.”