Expert suggests there's a high potential for disruption
The UK’s upcoming general election could cause great challenges for the mortgage industry in the coming year, the Building Societies Association has suggested.
Paul Broadhead (pictured), head of mortgages and housing at the trade association, warned against politicians staging vote-grabbing stunts which could disrupt business.
“The biggest challenges in the next year may very well be as a result of the pending general election,” Broadhead told Mortgage Introducer. “The potential for this to cause disruption is high, and we can only hope that politicians refrain from any posturing or stunts in an attempt to win over voters in the lead up to the election.”
He urged: “Short-term, veiled incentives, such as stamp duty holidays, only serve to cause short-term disruption for no long-term gain.”
The main challenge facing today’s housing market, Broadhead believes, is an imbalance between housing supply and demand.
“As a nation, we have under-built for decades,” he reasoned. “Every government talks about how important housing is and then invariably installs a revolving door for housing ministers to come and go. We really need a coherent plan to build more homes and to build them with high energy efficiency so they don’t add to the 29 million homes that already need retrofitting.”
How could the next government support the housing market?
There are three things Broadhead would put at the top of his wish list for the next government. The first, he said, would be to create – and, crucially, deliver - a long-term, coherent housing strategy.
“This is usually included in all parties’ manifestos as they proclaim housing to be a high priority, but we have seen little real progress from any government,” he said. “We need action not just words.”
Broadhead also favours removing what he considers “unfair penalties and outdated rules” from Lifetime ISAs (LISA) and Help to Buy ISAs (HTB ISA).
“The changes in house prices must be reflected in the property price thresholds on these schemes, along with a commitment to review them annually to avoid them becoming outdated again,” he suggested. “I would also want to see the LISA withdrawal penalty reduced to stop taking savers’ own money if they use their savings outside the scheme’s outdated rules - that really is an unfair policy.”
Modernising the legislation for building societies, to put them on a level playing field with banks, is also important, in Broadhead’s view.
“Amendment of the Building Societies Act is long over-due, and is currently working its way through the parliamentary process,” he noted. “The proposed changes would ensure societies continue to operate safely and securely, whilst also enabling them to have more capacity to lend to UK consumers.”
Broadhead noted that a lack of housing supply has led to house price growth outstripping wage inflation.
“This, coupled with rising interest rates that are expected to stay higher for longer, and the ongoing cost-of-living challenges, is making buying and owning a home the most expensive it has been in living memory,” he said.
He acknowledged that the sector is supporting first-time buyers by increasing mortgage terms, and with innovations such as Skipton Building Society’s 100% Track Record mortgage, Nationwide’s Helping Hand mortgage, and Cambridge’s Rent to Home, among others.
“This innovation all helps and showcases the sector’s determination to support buyers to achieve their dreams, but affordability challenges will remain for the foreseeable future,” he predicted.
Read more: BSA report calls for major reforms to aid first-time buyers
What will the mortgage industry look like in a year’s time?
Looking ahead to where the industry might be in 12 months’ time, Broadhead observed: “The cost-of-living challenges will still be an issue for some consumers, but affordability should start to improve. Whilst the bank rate has not changed since August 2023, it is widely expected that rates will start to fall this year, and that is already being reflected in current mortgage pricing.
“Our Property Tracker survey (in March) showed an improvement in consumer confidence in the housing market, with fewer people saying they are concerned about being able to pay their mortgage. It also showed that whilst mortgage affordability remains the biggest barrier to buying a home, it was reassuring to see that this has fallen significantly over the past six months, from 71% to 62%.”
He added: “I think the biggest innovations coming down the tracks will be around environmental issues, as we strive as a nation to not only reduce our carbon emissions but also reduce our energy bills. Brokers are in a great position to raise awareness of green issues with consumers, starting conversations about the options and opportunities available to make homes more energy efficient.
“As trusted advisers, brokers are crucial to helping the widest group of consumers find the right product for their specific needs. For brokers, that means staying plugged into innovation across the whole market, not just the market leaders.”
The Building Societies Association represents all 42 building societies and seven of the larger credit unions. These have a vast reach, serving around 26 million consumers across the UK, and helping over 3.5 million families and individuals to buy a home. They also hold over £370 billion of retail savings.
Broadhead has been with the association for more 15 years. So, with this in mind, what one business lesson from his career would he want to share with Mortgage Introducer readers?
“Perseverance,” he replied. “If you believe in something and want to create change or make an impact, keep talking about it. Just when you feel that you’re fed-up of saying the same thing, often others start to hear it.”
