It could make it tougher for renters - and affect brokers too…
A “disappointing” decision by Rachel Reeves to cut right-to-buy discounts for those renting social housing will make it harder for them to get on to the property ladder, according to lender Bluestone Mortgages.
Potentially, the Chancellor’s Budget announcement could also impact some broker business.
Reeves revealed the cut to the right-to-buy discounts when she addressed the House of Commons last week, along with a decision to enable local authorities to be able to retain the full receipts from any sale of social housing, to be reinvested back into housing stock.
Bluestone’s strategy director Ryan Davies (pictured left) has urged greater collaboration between the government and the mortgage industry to overcome the UK’s housing crisis.
Currently the biggest discount possible is £102,400 across England and £136,400 if you live in London, though these maximum discounts are reducing considerably from November 21 - down to £16,000 and £38,000 respectively.
The District Councils’ Network reported earlier this year that 6,000 council homes were sold under the scheme in England last year and only half of them had been replaced.
The Chancellor committed £5 billion to deliver the government’s housing plan, increasing the Affordable Homes Programme to £3.1bn, including investment to renovate sites across the country and deliver 2,000 new homes. But Davies believes more needs to be done – and the cut back on right-to-buy discounts is a setback.
“We were disappointed,” Davies told Mortgage Introducer. “This will make it harder for the individuals renting social housing to purchase these properties.”
While governments have tried to tackle the housing crisis by boosting housing stock, they have consistently not met their targets, he said.
“While the pledges of the provision of new homes is a good start to fixing the housing crisis by tackling the long-standing issue of supply, this alone is not enough,” Davies observed. “This must be combined with buying initiatives to help make homeownership a reality. We need to see more affordable homes being built, more ways to help people save, and more innovation from lenders in helping access funds in a secure yet aspirational way.”
Successive governments have tried to tackle the housing crisis by boosting housing stock, but have consistently not met their targets, in Davies’ view. He added that they have overlooked some of the other key challenges preventing people from getting on to or up the property ladder - affordability and saving for a deposit.
“First-time buyers are feeling the squeeze of both the cost-of-living crisis and the removal of schemes such as Help to Buy when they look to save the deposit,” he noted.
Support for first-time buyers is key
A lack of clarity from the Labour government about the mortgage guarantee scheme, that supports homeownership, is putting additional strain on first-time buyers, Davies said. New initiatives like Deposit Unlock, which allows first-time buyers to purchase a new-build house or flat with a deposit of 5%, are key, he reasoned, enabling would-be borrowers with low deposits to get onto the property ladder.
“We would like to see greater collaboration between the government and the mortgage industry moving forward to support the root causes of the housing crisis,” said Davies. “While housing stock is and should be a priority for the new government, providing innovative solutions to help buyers get onto the property ladder is just as important. Schemes such as Deposit Unlock could prove to be the lifeline that people need to achieve their homeownership dreams and fill the void left by the end of the Help to Buy scheme.
“The end of this scheme has had wider ramifications for the market, including builders’ ability to sell homes and the rate at which housing stock continues to grow. As the government has not met its new homes objective for some years, they must consider how to stimulate growth when this key incentive has been removed.”
He added: “Affordability remains a key challenge and one that we as an industry are working hard to address. We are constantly looking at ways to innovate and evolve our propositions to enable those with smaller deposits to climb onto or up the property ladder.”
Read more: Change is ‘too slow’ in the mortgage industry - exec
Can Right to Buy be abused?
Brokers who specialise in Right to Buy will see a drop in cases, believes Michelle Lawson (pictured right), mortgage & protection adviser at Lawson Financial, but she otherwise welcomes the revised policy.
“I think this change is a good thing as I have seen people benefit from a huge saving and then go on to refinance after the restrictive period ends and use the equity to buy a buy-to-let property,” Lawson said, “This isn’t a good use of council funds and not the purpose it was designed for. It will be harder for first-time buyers to save the deposit as in Right to Buy cases they don’t have to find one.”
