The Council of Mortgage Lenders welcomed the proposals. It has said for some time that the fundamental cause of affordability pressure in the housing market is the lack of an adequate supply of housing, creating an imbalance between supply and demand. The new prime minister's immediate focus on housing supply is therefore welcome.
The Treasury announcements relating to covered bond legislation and the forthcoming review of wholesale funding are also welcome. But the CML said it was difficult to assess their potential impact on the availability of long-term fixed-rate mortgages at this stage. The CML looks forward to seeing more detail and discussing the issues in more depth with the Treasury.
CML senior policy adviser Rob Thomas said: "Innovations in mortgage funding are a key driver for new types of mortgages, so the Treasury is right to examine this area closely. But the issue is just as much about the consumer appetite for long-term fixed rates as about how they are funded.
"It is too early to say whether these announcements will create a significant shift in the design of the mortgage products of the future, but we welcome the government's willingness to look at the funding side and we also welcome the renewed focus on increased housing supply."
David Butler, the Chartered Institute of Housing (CIH) chief executive, said: "We are delighted that the new Prime Minister has responded positively to our call to increase the supply of affordable homes. We also welcome the opportunity to influence government thinking through the consultation process announced by the Prime Minister."
CIH and its partners want the Government to commit to funding 210,000 new affordable homes over the next three years which would require an investment of £11.6bn, through the Comprehensive Spending Review.
CIH also welcomed the Prime Minister's recognition that public/private partnerships are an important way to release funds for building new affordable homes. Butler continued: "The housing sector has one of the best records in levering in private money, but to play its part efficiently this means increasing public influence to ensure the most output in terms of new affordable homes."
CIH also agreed that land supply is a blockage to the building of more affordable housing, but it is important that developers work within the strategic plans of local authorities to deliver affordable housing where it is most needed as part of mixed tenure and mixed income estates.
Local authorities can also play a crucial strategic role in planning and co-ordinating the supply of new affordable homes through all providers to meet the needs of their local area.
The CIH said Gordon Brown's proposals to make home ownership more accessible for first-time-buyers through more shared equity schemes is welcome, and housing associations are already helping many tenants get into home ownership. But many first-time-buyers cannot afford to buy their own home even with the help of shared equity schemes.
It added Brown is right to identify the chronic lack of supply as being at the heart of the affordability crisis, but it is crucial that whatever increase in supply is available goes to those people who are struggling to get on the housing ladder. CIH has already drawn attention to the fact that buy-to-let owners have a financial advantage over those trying to buy their first home, as well as pushing house prices even higher, and CIH wants Government to remove the tax relief currently available to these investors. CIH also wants more to be done to halt the rise in the 'buy-not-to-let' market, where investors buy flats, whole floors or even entire blocks of apartments off-plan with no intention of letting them out.
Nici Audhlam-Gardiner, head of mortgages at Abbey, said: "While it's positive to see that home ownership is on the government's agenda, it is critical to ensure that initiatives align with what customers want. In recent years mortgage customers have shown a clear preference for shorter-term fixed rate mortgages over longer-term ones. Twenty-five years is a very long time in the financial world - economic circumstances and people's lives change fundamentally. Few people are willing to tie themselves into a deal for this length of time - they want more flexibility."
