New home targets will need the lending community to be onboard

The new Labour Government has wasted no time in parking its tanks on the lawn marked housebuilding, with the Chancellor, Rachel Reeves, immediately reintroducing new home targets for England, and an anticipated array of planning reforms in order that more developments can be built on both brownfield and ‘grey belt’ land. There is a very good reason for this, not discounting the fact we need far more housing supply in this country, but also in terms of Labour promising to build 1.5 million new homes over the next Parliament. To say that, historically at least, this is ambitious would be something of an understatement and they have clearly decided that they already need to get a wriggle on. What will be pretty obvious to all within the mortgage market, is that any significant increase in housebuilding is going to require a lending community willing and able to provide the lending solutions required to get people into these homes. Labour, it would seem, are not planning to resurrect Help to Buy but – as we have already seen – there are already private alternatives to such schemes, perhaps most notably Deposit Unlock, which we support as a business as we work with those lenders who want to be active in it. This gets people into a new-build home with just a 5% deposit – or in some cases, no deposit at all if the developer can put up the 5% - and while we have a growing number of lenders participating in the scheme, it would be obvious to put even more Government support behind this, and to encourage as many lenders as possible to be active in it. Indeed, you might justifiably argue that Labour’s own ‘Freedom to Buy’ mortgage guarantee scheme might be the least required element of its housing policy, given how few lenders are currently using Government guarantees, how most lenders who want to use insurance opt for private alternatives, while the majority – certainly of banks - prefer to take the risk on the balance sheet. Which, of course, is not to say that the sector couldn’t benefit from a greater array of high LTV mortgage options, just that the lending community might be better served by more flexible, less costly private mortgage insurance to meet those goals, rather than opting for the Government alternative. In terms of the provision of high LTV mortgage loan products, progress has clearly been made over the last couple of years. According to recent data from Moneyfacts, the number of low-deposit deals on the market is now at its highest level since May 2022, but at 361 has not quite reached the level achieved back then of 369. Clearly, the Mini Budget caused a significant drop in the number of these products available, and we might all say that we still have some distance to travel in terms of getting the number of products low-deposit/equity borrowers require back to the right levels, and importantly, at a competitive price. Higher LTV mortgage products tend to be priced far in advance of their lower LTV counterparts, and this of course makes the affordability hurdle far more difficult to get over for first-time borrowers, and has undoubtedly curtailed the number able to get a mortgage to get on the housing ladder. Far greater levels of competition, particularly at 95% LTV and, dare I say it, even at higher levels, would put pressure on pricing, and would open the doorway for many more borrowers who, up until now, have simply seen owning a home as nothing more than a pipe dream. In other words, any increase in housing supply has to be matched by the appetite of lenders to get involved in the schemes first-timers use, to look for opportunities like Deposit Unlock which is of course specifically focused on new-builds, but to also recognise that if we want to get younger people into affordable homes then we’ll need to offer more higher LTV products, given the struggle to save that many people are going through. At the start of any new Government there tends to be a greater degree of optimism about what can be achieved, and we should make the most of this, particularly from a lending perspective. If we can get anywhere near the ambitious new-build numbers we’ll certainly want lenders doing more than their fair share to supply the next generation of buyers who, quite frankly, have been done a dis-service in their ability to buy over the last couple of decades.

New home targets will need the lending community to be onboard

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