MortgagesDec 8 2016

Article 50 effect on first-time buyers

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Article 50 effect on first-time buyers

Article 50 being triggered may have less of an effect on the market for first-time buyers than the initial Brexit vote result, commentators have claimed.

Respondents to this guide believe the vote to leave the European Union (EU) was more of a blow than the eventual triggering of Article 50 will be, so the prospective pain for first-time buyers as the UK heads towards Brexit will be far less than people may fear.

According to Roland McCormack, mortgage distribution director for TSB: "It is difficult to predict the full effect that triggering Article 50 will have on first-time buyers, but we do not expect there to be a major initial response.

"We know, for example, confidence in the mortgage market returned quickly after the shock of the EU referendum result, whereas in contrast, the market already expects the triggering of Article 50 and we have some guidance on the timing of it."

Our country needs to see long-term initiatives and plans that will last longer than just one parliament.Jeremy Duncombe

Some respondents to this guide believe heading towards Brexit may be positive for first-time buyers.

John Phillips, group operations director at Spicerhaart and Just Mortgages, says: "I think the eventual triggering of Article 50 will have a positive effect on first-time buyers as the uncertainty in the market will begin to vanish and everyone will know exactly what we are dealing with."

David Hollingworth, associate director of communications for London and Country, comments: "It is impossible to predict how it will affect the markets, economy and consumer confidence.

"Once triggered, there could be a further wave of uncertainty that dents confidence. Even then, some first-time buyers may view it more positively, if it limits competition and eases upward pressure on house prices.

"However, Article 50 should not come as a surprise and it is surprises that markets do not like. If the future direction of Brexit is clearer, there may be little to no further wobble."

Expect the unexpected

For Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, it is far too early to know one way or the other what impact triggering Article 50 will have.

He says: "It is unlikely to be the firing of the starting-gun that will cause any impact on first-time buyers; more likely it will be any leaked details of the negotiations that will have an effect."

That is, of course, if Article 50 is triggered. As Donna Hopton, founder of broker forum Cherry, comments: "There is still some doubt in some quarters about whether it will in fact be triggered. 

"But even if or when it is, there seems to be no consistent view from brokers on its impact for first-time buyers, albeit clearly people will still need to house themselves regardless of whether or not we are in the European Union."

Longer-term

While government may be caught up in the pre-Article 50 and post-Article 50 negotiations, it is clear the government must not forget or neglect suitable housing policies that will help more people onto the housing ladder and into affordable housing.

Jeremy Duncombe, director of the Legal & General Mortgage Club, explains: "Our country needs to see long-term initiatives and plans that will last longer than just one parliament.

"it will be interesting to see what our new government has in store for future housing policy, and we expect some concrete initiatives."

Moreover, the various reliefs and initiatives created by the previous government to get more people onto the housing ladder have gone some way, but more help will be needed over the coming years - especially as the end of the Help to Buy: Mortgage Guarantee Scheme is this month (December 2016).

This is the view of the Council of Mortgage Lenders (CML), which commissioned research in November called: Government Housing Schemes - Accident or Design?

This looked at the various "patchwork" of eight government housing schemes, and found these only succeed in reaching a broad variety of would-be home-owning households "more by accident than design".

The CML research states more needs to be done to make the various schemes, such as Help to Buy and Right to Buy, successful in helping more people to become homeowners, and not just the better-off ones, which the survey shows are those who are benefiting most from certain initiatives.

Figure 1: How the schemes help various income levels best. Source: CML

Paul Smee, director general of the CML, comments: "We commissioned this research not only to describe the current schemes and how they fit together, to help stakeholders understand them in a holistic way, but also to identify where there may be gaps or anomalies that government might wish to address.

"We hope this helps focus policy thinking on the best way to allocate resources to achieve the government's strategic housing objectives as effectively and fairly as possible."

simoney.kyriakou@ft.com