10 ways to get the mortgage market moving
With all the negative sentiment surrounding the UK mortgage market at the moment, Legal & General has put together its ‘Mortgage Manifesto’, or 10 things that government, providers, brokers and borrowers can do to help improve prospects for the market in 2012.
1. Government to waive Stamp Duty for second-time buyers:
The government should consider waiving Stamp Duty altogether or implementing a two-year holiday for second-time buyers up to an agreed maximum price. This part of the housing market has become stuck and as a result is restricting choice for first-time buyers entering the market.
Managed carefully this shouldn’t result in too much supply of second hand property to the market. Therefore any argument that this might serve to reduce asking prices feels wrong. Consumer confidence, equity levels and mortgage finance aren’t sufficiently in supply for this problem to occur. Incentivising those that are thinking about moving to go for it will help to get the market moving again as well as having a positive knock-on effect on the economy and employment.
2. Government to fully commit to helping the construction of more new homes, in the right areas:
We need more choice. This would help the construction sector and wider employment, and give more people the chance to buy a home, rather than becoming long-term renters.
3. Mortgage industry to dispel the myth of mortgage drought:
As an industry we need to work together to inform people what their choices are. Many think they can’t get a mortgage when in fact they can. People are saving for a huge deposit but may be able to buy their first home more easily and it is up to the industry to make people aware of all the options available to them.
4. Industry and government to work to free up long-term renters:
There are a lot of tenants who have rented for many years and have built up a great track record of repaying high levels of rent in a disciplined manner on a monthly basis. Accepting that there are capital constraints and that lenders need to lend sensibly and appropriately, there has to be a large segment of tenants who constitute acceptable risk and should be helped into buying their first home.
More promotion should be done by the industry to court, and provide mortgage products specifically for, long-term top quality renters.
5. Intermediaries are best placed to provide a solution:
Well over 90% of all intermediaries offer not only breadth of choice but full advice. Merely one third of all lenders can offer advice in this way and none can offer the same breadth of choice that an intermediary can.
Intermediaries should work hard to help customers to understand this, where research shows many simply don’t. This would result in better informed and happier customers.
6. Advisers to help borrowers to fix:
Identify the one in three borrowers who would now pay up to £1,200 more to fix their mortgage rate, and fix them. Rates are at an all time low; there has arguably never been a better time to broach this discussion.
7. Industry should make both children and parents aware of all first-time buyer options.:
Typically it’s children who explore the guarantor options and most are not aware of what products might exist today. This is a market that the likes of Aldermore and Nationwide are working hard to help and more innovation is expected this year.
Intermediaries and lenders all have clients in their 50s and 60s and should proactively clarify what options they might have to help their children onto the property ladder.
8. Borrowers look to overpay or offset their mortgage:
The fortunate few who have spare cash could do a lot worse than to reduce their mortgage debt. Banks could do with the money back, overpayments represent a guaranteed return usually at rates far better than retail savings and of course any borrower that does this will increase their equity and put themselves in a better position for future moves.
9. Homeowners take advantage of a low base rate:
Most experts predict the base rate will stay at 0.5% for many months yet. What is your plan if you are benefiting from this? Are you simply going to spend any extra cash, or can you save lots for future moves or home improvements?
If you are able to, now is a good and cheap time to secure reduced-cost labour on home improvements, thereby increasing your living standards and house value and spreading your wealth to other sectors that might need the extra work.
10. Let’s all talk the economy up, or at least emphasise the positive:
Nobody wants to constantly falsify how good things are, but there is a balance to be found. Bad news has been trending for four years or more and sooner or later consumers and businesses look for good news and grow tired if not immune to grim headlines and results.
Let’s all make a point of more widely covering the good news and contributing to the UK economy and housing markets getting back onto their feet again.