The Council of Mortgage Lenders’ director general has urged the Conservative Party to put “flesh on the bones” of its pre-election housing pledges in order to counter the key challenge of risk aversion and a lack of appetite among lenders to take on certain borrowers.
Speaking to FTAdviser, Paul Smee said that he was aware of a ministerial task force being created to prioritise housing issues, but noted that this was one of more than 20 such groups vying for resources.
“The government needs to put into practice house building promises, but it has to appreciate this doesn’t necessarily change lenders’ risk appetite... there are still costly systems changes involved in implementing some of the proposed new schemes.”
At the end of last month, the Queen’s Speech confirmed plans to build 200,000 starter homes over the course of this parliament, reserved for first-time buyers under 40 and sold at 20 per cent below market price, along with the controversial re-starting of the Right to Buy scheme.
This was cautiously welcomed by the industry, with experts warning the government against just tinkering, rather than making bold moves to solve the housing crisis.
Reinforcing this point, he said that turning promises like the Help to Buy Isa, set to launch in autumn, into a reality would take time, and while there will be interest from consumer it is unlikely to “radically shift” the market.
Recent surveys have suggested first-time buyers feel their chances of getting on the housing ladder are declining as house prices are now out of reach for many, while more stringent affordability tests under the Mortgage Market Review have also created a number of issues.
One problem is that of so-called ‘mortgage prisoners’ or ‘trapped borrowers’, who are frequently being prevented from moving home despite the fact that they are not looking to increase their borrowing, which qualifies them for an exemption from the new assessments.
Mr Smee said the CML and Association of Mortgage Intermediaries are making progress in dealing with this, although he cautioned that not all of those affected are MMR ‘transitionals’.
Another of the council’s ‘work streams’ this year is concerned with borrowing into old age, which is also related to the tougher approach of banks post-MMR.
Mr Smee raised what he sees as an “interesting dynamic” between residential lenders and equity release providers, who “must work together” in the future to ensure older borrowers are catered for adequately.
Looking forward to the rest of the year, Mr Smee mentioned the European Mortgage Credit Directive, one sticking point with which appears to be around consumer buy-to-let. Mr Smee stated it is key the FCA accepts self-declaration under the new rules, to avoid ‘second guessing’ the rules.
The FCA’s technical mortgage specialist Keith Hale recently said: “We want to do the bare minimum and are not going to be prescriptive and tell you exactly what you to need to do.”