One thing we can categorically state is the uncertainty generated by not knowing what would be in the Budget is now over. There may be many reasons to rail against the policies and measures announced but at least we now know what they are.
Even with a slight post-August Bank Base Rate (BBR) cut activity ‘honeymoon’ during the late Summer and into early September, it’s fair to say that in the six or so weeks leading up to the Budget, there was a growing disquiet about what it would contain and how tough it would be. And this seemed to impact on activity.
Let’s be frank, there was much in the Budget that is unlikely to be welcomed, but again to stress, at least we can now move forward from that.
Take, for instance, the first-time buyer marketplace. Even though it was fairly well known the Government would not be keeping the first-time buyer-friendly current stamp duty thresholds, and would be reverting back in April next year, there was still a slight hesitation about whether the Government might still not follow through.
After all, in terms of noises the Government has continued to make some significant ones about how it’s going to help more first-timers onto the property ladder, particularly in terms of the delivery of more new affordable homes, and therefore it wasn’t beyond the realms of possibility to think it could keep the current thresholds because it would save new buyers tax.
However, given what the Labour Party were saying about the state of the country’s finances – and given many in Government believe stamp duty to be a sacred cash cow – then any sort of extension to the current thresholds began to look more and more unlikely.
And, so it came to pass that the Government was effectively true to its word here. It did not extend the beneficial terms for first-time buyers. Now we know that, and now we can react with certainty to that.
As an industry we know – as I write – if first-time buyers want to benefit from the current thresholds they have slightly more than four and a half months to complete by, which as I’ve said before, might sound like an age to them, but anyone involved in property will know that there are no guarantees of a transaction being completed in this timescale, especially if they are involved in a chain.
What else do we know? Well, we know the Government is continuing with a mortgage guarantee scheme and there are discussions at the moment about whether that could be a permanent part of the market.
For what it’s worth, and my views are widely known on this, I can’t help but think this is a waste of taxpayer’s money – however small in the grand scheme of things – which could ultimately be put to better use.
Don’t get me wrong, historically the Government’s ability and appetite to guarantee the provision of high LTV mortgages was absolutely necessary, and without it, I’m certain we would not have the vibrant high LTV marketplace we have now. It took us from a market where we had approximately half a dozen 95% LTV products to one where we now have approximately 250.
It clearly ‘did a job’ but the limited take-up by lenders now due to all kinds of criteria, not least the cost, the inflexibility etc, makes it somewhat redundant. I’m not sure any new variation of a guarantee scheme is going to move the dial as the Government might believe it will, not least because lenders have clear private alternatives from the likes of us, plus it’s a much healthier, competitive sector where lenders who don’t use insurance are willing to take the risk on their balance sheet.
For those reasons, it feels like an overegging of the mortgage pudding on the Government’s behalf and, as mentioned, it might have been far better to ear mark that money for other housing needs, namely supply, but potentially changes to planning, or indeed greater resource for those departments that truly need it.
The other certainty we now have is back to stamp duty, but it is the extra surcharge for additional homeowners, which really for the most part means landlords.
What impact this will truly have, as opposed to what the Government believes it will, remains to be seen. Presumably, they think landlords will be put off adding properties to their portfolios and instead it will be first-time buyers who benefit instead.
This seems unconvincing, not least because of the property types and the mis-match between those that are often deemed rental properties and those that first-timers actually want to buy. Plus, of course, any further decrease in supply in the PRS impacts would-be buyers anyway, as tenant demand remains strong, and low supply will continue to filter into higher rents which of course impacts on the ability to save for a deposit.
Overall, it is a mixed bag, but again at least we know what is in the bag. We could say similar things about the US Presidential Election result, and November’s MPC meeting, with only one more to come in 2024.
Certainty in those areas gives us a much firmer foundation to work from, and given first-time buyers are likely to remain the largest purchasing demographic again this year and probably into the future, then it would not surprise me to see much more focus from lenders on their mortgage needs, which should undoubtedly mean greater high LTV product choice and activity.
