Michael Coogan participated on behalf of the CML with an impressive line-up of fellow panellists, including Bank of England monetary policy committee member Kate Barker, Morgan Stanley chief economist David Miles, BBC chief economics correspondent Hugh Pym and Countrywide chief executive Grenville Turner.
Michael Coogan argued that a shortage of funding continued to be the main constraint on the mortgage market and that there was pent-up demand from consumers, although it was difficult to say how much.
Specialist lenders, he said, were comatose; building societies were largely hibernating; and some banks were re-structuring. So while the government had said there were commitments to more lending from a handful of large firms, what impact would this have on the market overall? With so few active lenders, the number of housing market transactions is set to remain low.
He went on to defend lender decisions to stockpile capital and increase liquidity, arguing that caution by the Financial Services Authority (FSA) was a key factor. “The government's fears of a repeat of the Northern Rock fiasco, where savers queued around the block to make withdrawals, have driven lenders to stockpile money which could otherwise be lent,” he said.
Kate Barker said: “Lenders are right to be extra careful today in light of future uncertainties, with unemployment and repossessions continuing to rise.” David Miles added: “Once the dust settles, it will be sensible for institutions to have substantially more capital than was thought necessary before the credit crunch.”
Hugh Pym suggested that the government had the power to encourage the partly nationalised banks to lend more but urged caution, saying: “100% mortgages are not a good idea. The FSA has a right to intervene where necessary.”
The rental sector
Panelists agreed that a surge in demand from young people now forced to continue to rent much later in life would drive a major expansion of the private rental sector. The need to save larger deposits following the recent tightening of lending criteria and the drying up of availability of 100% mortgages would result in more individuals waiting until their late thirties or later before buying their first home.
David Miles said: “Reduced loan-to-values will bring about an increase in the age of the average first-time buyer, as we return to a culture of saving for deposits. This will probably mean that the private rental sector will need to expand through private buy-to-let landlords or professional investors.”
Michael Coogan argued that there was a need for a larger private and social rented sector. Perceptions of mortgage lenders would be affected by the extent to which amateur landlords encountered problems and the difficulties created for tenants by landlords with a residential mortgage letting the property without the knowledge or permission of the lender.
Speaking from the floor, John Heron, the managing director of Paragon Mortgages, added: “The small-scale private landlord remains critical for supply and will drive rental sector expansion over the next five years. The government must show its support for the industry by ensuring that any measures to support struggling property owners, such as the new mortgage guarantee scheme, apply to landlords as well as owner-occupiers.”
House-building targets
Kate Barker, author of the 2004 Review of UK Housing Supply, called on the government to be flexible in pursuit of house-building targets, which were looking increasingly impossible to meet.
Targets set 12 years ahead were misguided at best, particularly when taking into account factors such as net migration and falling income levels, which influence the outcome but may change dramatically over a much shorter period.
Kate Barker said: “The existing target of 240,000 new homes per year by 2016 is difficult, if not impossible, to meet. When the housing industry was booming, we still only achieved 200,000 new homes in one year, which raises the prospect of prices rising sharply again in the future. Going forward, local authorities will need to be more flexible on planning policy and be capable of processing planning applications more quickly when demand returns.”
Grenville Turner agreed there was a need to re-think government targets. He said: “House-building targets have motivated the wrong kind of behaviour, resulting in a distorted mix of new homes and an over-supply of apartments in particular.”
Michael Coogan argued that, for lenders, a key issue was ensuring reliable valuation of newly-built property. Concerns about this had made lenders cautious at a time when funding was already in short supply. And low-cost home-ownership needed to focus on shared equity, rather than shared ownership, models, he said.
Property and pensions
There was also a strong consensus among panelists that relying solely on property to make up the shortfall in pensions was short-sighted.
Michael Coogan supported the need for broad-based financial planning. But while property should be only part of the picture, the reality was that there remained £2,000 billion of unmortgaged housing wealth that would be used by someone.
Asked by Andrea Rozario, of Safe Home Income Plans, if equity release was the answer, Michael Coogan said: “I am not convinced we have the right range of products, in particular enough of those that provide the sort of draw-down facility that customers want.”
Kate Barker added that investing all funds in one property was risky. Housing was not the way to resolve the pension crisis. Hugh Pym believed equity release could have a role if it was “properly regulated,” but added: “Funding pensions via property is not the answer.”
Stamp duty – and HIPs
With the debate taking place two days before the Budget, the panel gave the thumbs-down to stamp duty, with David Miles arguing that one of its obvious disadvantages was it was a tax on transactions. On home information packs (HIPs), the panel unanimously agreed that they had been poorly implemented. But there was general approval – from the floor as well as among panellists – for reforming and improving them, rather than scrapping them altogether.
