This year has been a “tumultuous” one for the housing market, but despite challenges there has been some good news for first-time buyers, according to the Intermediary Mortgage Lenders Association.
Speaking to FTAdviser, IMLA executive director, Kate Davies said while the sector has shown its “typical resilience” over the past 12 months, it has had to deal with significant macroeconomic challenges, the likes of which “we have not seen since the 2008 financial crisis”.
The decision by the Bank of England to raise the base rate eight separate times in the past year in response to rising inflation has meant brokers and lenders have been under pressure to adapt.
“Combined with falling real wages and the soaring cost-of-living, rising interest rates have meant that finding the right mortgage is now even more important for homebuyers and those looking for a new fixed rate product,” Davies said.
House prices continued to rise sharply for the majority of 2022, with the average UK house price peaking at £296,000 in August.
Davies highlighted this has led to concerns it is now much harder for first-time buyers to get a foothold on the property ladder and noted that the situation will only be exacerbated when the help to buy scheme comes to an end in March.
“There has been some good news for first-time buyers. This year we saw the Bank of England remove the affordability stress test for mortgage applications, something that IMLA had long campaigned for and which will get rid of a key barrier to first-time buyers trying to make their first step into homeownership,” Davies said.
“However, one of the main obstacles to first-time buyers looking to step onto the housing ladder remains. This is the continued commitment to limiting the number of mortgages with a loan-to-income ratio of more than 4.5 times for borrowers,” Davies added.
“These higher LTI products are capped at 15 per cent of lenders’ books, making it harder for those on lower incomes to become homeowners. 2022 has certainly placed an important renewed focus on supporting first-time buyers, but practical solutions remain in their infancy.”
Housing shortage
Davies also noted that a key area where action is needed to support first-time buyers is actual home building.
However, on this front she believes Westminster has been playing a game of “pass the parcel” this year.
Earlier this month, the government watered down its manifesto target to build 300,000 new homes every year by 2025, saying instead that it is ‘advisory’.
“The current Secretary of State for Levelling Up, Housing and Communities, Michael Gove, has been re-appointed to a post which has seen two holders of the position come and go since his abrupt departure from the Boris Johnson administration.
“Although each secretary of state has set out their intentions to improve housing supply, action has been clearly hindered by a lack of continuity, no coherent long-term housing strategy and significant political upheaval, including the Truss administration’s ‘mini-Budget’,” Davies said.
She added: “In 2023, it’s essential that we see stability return in Westminster, so we can return to the long-term planning that is so vital to sensible housing and mortgage policy.”
Davies explained that over the course of the next year, IMLA wants to see Rishi Sunak’s government focus on “building a long-term strategy to resolve the critical shortage of housing in the UK, and to increase levels of homeownership across the country.”
“More than anything else, this means taking action to deliver new housing stock and upgrading existing homes. It also means going further to support those looking to get onto the housing ladder, including by urgently finding viable replacements for the winding down of help to buy,” Davies told FTAdviser.
Back in November the House of Lords’ Built Environment Committee published a report with seven recommendations to meet future long-term housing demand.
This included tackling a labour skills shortage, supporting SME house builders and prioritising planning reform to ensure that local planning authorities have the resources and staff they need to provide an efficient planning service.
In Davies' view, the report showed that the government has the ability to strengthen and protect the housing market, but “only if they have a long-term strategy, which we’ll need to see take root in 2023”.
jane.matthews@ft.com
