Mortgages  

Help to Buy still needed, says Leeds CEO

Help to Buy still needed, says Leeds CEO

The chief executive of Leeds Building Society says he sees no reason why the government's Help to Buy scheme should end until housing supply is significantly increased.

Speaking to FTAdviser following the release of the building society’s annual results, Peter Hill said the scheme has played an important role in boosting market access.

The building society, which posted record pre-tax profits of £116.6m in 2016, offers a range of Help to Buy products among its portfolio.

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Mr Hill commented: “We have been very committed to Help to Buy and one of the first lenders to introduce a Help to Buy mortgage range, and we think it is important to support it for a long time to come.

“There needs to be something there to underpin that area of the market, whether it is Help to Buy or something else.

“I don’t see any reason why Help to Buy should be wound down. What we are seeing in the housing white paper is a strong signal regarding the direction of travel, but there is a long journey between policy and increasing housing supply to the extent that it creates more access to the market.

“Until that is done, I think help to buy has a really important role to play.”

The building society has now posted record profits for the fourth-year running, as net mortgage lending also reached an all-time high of £1.9bn in 2016.

Mr Hill continued: “Five years ago we set a vision for what we wanted to do and said we were going to be very focused on saving and mortgages and make sure what we did provided some resilience as markets became more competitive. 

“We have stuck to that and have been able to deliver strong growth.

“What we have seen is a lot of margin competition. Interest margin has come down from the peak in 2005, and because of strong competition in the mortgage market what we have seen is margins a few years ago replaced by mortgages at a lower margin.

“That is why we have been focused on underserved markets, and provided that we continue to make good progress in these markets then I think the outlook is good.”

Although he believes ‘testing times’ lie ahead for the market in 2016, Mr Hill added that he did not foresee problems arising from a hike in interest rates.

“When you look at the market-implied view of rates by looking at swap rates, that would suggest rates will stick to where they are before 2019 and the path going forward will be slow increases, which does not seem unreasonable given the reality of Brexit negotiations,” he explained.

“Because of the way we stress affordability I think customers are well placed to deal with a rising rate environment.

“A rising rate environment does give us a bit of an opportunity for us to get saving rates off the floor. We are doing well on savings rates and there is a chance to keep things moving.”