Whenever an election now takes place, housing and mortgages will be key issues in the campaign. They have, of course, enjoyed a high political profile for some time already. And as a result, there has been a significant increase in the last couple of years in the number of meetings we have held with the chancellor and other ministers, as well as Conservative and Liberal Democrat shadow spokesmen and backbench MPs.
So, what can we glean at this stage – from those meetings and from what each of the major parties have said so far – about what might be in their election manifestoes about housing and mortgages?
Labour policies
Earlier in the year, the prime minister spoke of the need to strike a balance between serving home-owners better and encouraging responsibility in the housing market. "We have to solve this problem of affordable mortgages, and I believe that perhaps the mortgage market could be simpler," he said.
There have been some suggestions that the government should use nationalised banks to offer standardised mortgage products. The Turner review also aired the possibility of limiting loan-to-value or loan-to-income ratios. And both Lord Turner and the Bank of England governor, Mervyn King, have echoed a question posed by the prime minister about whether it should ever be possible to take out a mortgage for more than a property is worth.
For a number of years, the government has also said it would like to see greater take-up of long-term fixed-rate mortgages. There have, however, been no policy measures to encourage this, although the government’s aspirations may have been thwarted by disruption to the mortgage market as a result of the credit crunch.
In response to the continuing shortage of housing finance, the prime minister has indicated that those local authorities already having the power to issue mortgages should be encouraged to do so.
Housing reform
As part of its draft legislative agenda for 2008/09, the government also announced that it is working towards a housing reform green paper with proposals to "create a fairer and more effective system for those living in rented housing." This could be an opportunity to respond to some of the measures set out in the recent Cave review of social housing regulation and the Rugg review of the private rented sector.
In response to wider financial market disruption, the government has said it intends to publish a paper this summer setting out its approach to:
reviewing financial regulation;
reducing the effects of the failure of firms in the financial sector;
protecting and supporting consumers;
improving efficiency and competition in financial markets; and
strengthening the national and international regulatory framework.
Among other things, the wide-ranging Turner review – published in March – looked at reforms that might be needed on capital adequacy, accounting and liquidity. The chancellor has also argued that firms with an appetite for risk should be required to have a bigger capital buffer.
Regulation – and innovation
While the chancellor wants to strengthen liquidity and capital requirements, he has also said that he supports innovation and wants to encourage competition. In his speech to the Financial Services Authority’s (FSA) conference on the Turner review, he reminded the audience of the huge growth in fixed and tracker mortgages in the last decade. "Innovation can be a force for good," he said. "Many of the development of the recent years have brought huge benefits."
In the same speech, the chancellor said he wanted to encourage diversity among the institutions providing financial services, including building societies and credit unions. A month later, he re-iterated these sentiments in his Budget speech, and the government is now considering how best to encourage new entrants into the financial services market.
Consumer protection remains high on the political agenda, and a number of reviews are under way. The Office of Fair Trading (OFT) is currently consulting on guidance for firms providing second charge lending, with guidance on responsible lending due in the autumn. The government is also looking at the division of responsibilities between the FSA and the OFT on the regulation of second charge lending.
Another strand of the OFT’s work is its consultation on a financial services strategy. The Department for Business Innovation and Skills is also expected to publish a white paper in the summer on measures to provide further help with their finances for people in difficulty, and to simplify and modernise consumer rights.
Conservative policies
Conservative proposals for mortgage and housing markets are contained in two key documents: the housing green paper Strong Foundations: Building Homes and Communities and a policy paper on reform of the financial system Reconstruction: Plan for a Strong Economy.
Setting the tone in his foreword to the green paper, David Cameron has written: "We need to kick our addiction to house price volatility and concentrate on making sure we build enough homes so that every community can meet its housing needs…and we need to give people a better chance to work towards a home of their own." The main proposals in the paper include:
abolishing stamp duty on house purchases of up to £250,000 for first-time buyers;
scrapping home information packs – energy performance certificates would be retained, however, and provided to purchasers at the end of the home-buying process;
support for shared ownership and intermediate housing tenure, with flexibility to increase or decrease the share of the property held in private ownership, greater involvement for the private sector and work with lenders to ensure that sharing ownership is a viable option for mortgage borrowers;
supporting an expanded role for private renting in meeting housing needs, with a review of regulation in the sector; and
expanding home-ownership by offering social tenants a 10% equity share in their home.
In its paper on reform of the financial system, published last autumn, the Conservatives said they would:
overhaul the tripartite system, with a more prominent role for the Bank of England, which would have powers to deal with failing banks;
create a debt responsibility mechanism, with the Bank providing a market-wide assessment of risk for the FSA, which the regulator would then take it into account when overseeing lending by individual firms;
improve regulation by the FSA, with firms providing more funding and seconding skilled staff to the regulator;
change the way in which capital requirements reinforce cyclical movements;
make the regulation of complex financial instruments and hidden debt more transparent;
make the housing credit market apply the same standards on data-sharing as the mainstream banking sector;
launch a free national financial advice service, with a £50 million annual budget funded by firms through a social responsibility levy; and
ensure the mortgage market is properly regulated, with a categorical rejection of an earlier recommendation by the Conservative’s own economic competitiveness group for reduced regulation.
The Liberal Democrats
The Liberal Democrats have published a series of documents setting out plans for the housing market and the wider economy, summarised in its Pocket Guide to Policy document. In particular, the party has suggested:
introducing a five-year fixed-rate, no fees, no frills Safestart mortgage based on conservative lending criteria, with lenders encouraged to compete on cost to industry standards overseen by the FSA;
court guidelines to underpin the use of possession only as a last resort, and to provide free independent advice for borrowers in difficulty and the chance to re-negotiate the terms of the mortgage or sell a share of equity to a registered social landlord;
action against irresponsible lending;
using equity mortgages and shared ownership to provide affordable homes for local people and first-time buyers;
scrapping Homebuy Direct in favour of a repair-and-renewal loan scheme for owners of empty properties, on condition that refurbished properties are leased for five years to a housing association; and
strengthening consumer bodies to ensure customers get a fair deal.
Working with politicians
We work routinely with politicians and will continue to ensure that ministers, opposition spokesmen, backbench MPs and political staff are kept up to date with issues, and briefed on industry views.
Key political contacts already receive information from us in a variety of forms. We send them copies of this newsletter, our press releases, our monthly market commentary and our Parliamentary newsletter Housing Finance at a Glance. Additionally, they receive copies of responses to consultations and research articles. We also hold regular one-to-one and group briefings for political contacts.
We continue this work, not just in order to influence the content of the political manifestoes whenever they are eventually published. Our work helps to shape policy on an ongoing basis, as well as influencing what appears in election material.
We will continue to target key contacts in the three major parties and keep them up to date with our views. In the build-up to the forthcoming general election – and when campaigning starts in earnest once an election has finally been called – we will ensure that relevant information, including our views on policy options, are communicated to political contacts, Parliamentary candidates and newly-elected MPs.
