Spring budget may offer pre-election sweeteners
As speculation grows of a general election, possibly as early as May, the property market could become a key area for those on both sides of the political divide, according to a lending executive.
David Hollingworth (pictured), associate director of communications at fee free broker L&C Mortgages, and a respected industry commentator, believes changes to stamp duty might be part of the upcoming spring budget.
Tax cuts are also possible, Hollingworth suggested to Mortgage Introducer, to boost confidence and positively impact the market.
“With a forthcoming election and a difficult period for homeowners, it looks like housing could be a strategic area for the government and opposition alike,” he considered.
“Changes to stamp duty were rumoured in the run up to the autumn statement and, despite no sign, it could still become part of the upcoming spring budget. It is something that can be implemented instantly, although first-time buyer relief is already in place so may need to be extended to home movers and landlords to prove a vote winner.”
When will the general election be?
Prime Minister Rishi Sunak has refused to be drawn on the date for a general election, saying only that there is a “working assumption” that it will be held in the second half of the year. This could, of course, be a bluff, to encourage the complacency of his rivals, before he announces an election.
The government’s decision for the chancellor, Jeremy Hunt, to deliver the spring budget in early March – the earliest it has been in years – has done little to quell speculation that Sunak could be eyeing an earlier polling date.
“The budget could be more focused on tax cuts to try and build confidence generally to have a positive knock on for the housing market,” Hollingworth reasoned.
“An extension of the government guarantee to boost the maximum LTV to 99% could help some first-time buyers, although affordability is often just as big a challenge as the deposit and would limit who it can help.
“It looks unlikely that Help to Buy will be resurrected, but with tough conditions for builders, many will hope that there will be help to ensure that the supply of new homes doesn’t reduce, which could further affect availability.”
The market clearly presented significant challenges for advisers and their customers in 2023, in Hollingworth’s view.
“Having seen some recovery from the mini-budget, the market was sent into another bout of turmoil with rates spiking in the summer,” he ventured. “That put paid to any rapid bounce in the purchase market but things have thankfully turned again.
“Falling fixed rates won’t remove the payment shock that has hit so many customers reaching the end of their fixed rate. However, the market also feels a lot better with rates dipping back to 4% and below, and lenders competing hard for business.”
He continued: “Falling inflation should bring interest rate cuts closer, although it could a take a little more time for that to feed through. That should help confidence build and activity gradually pick up as confidence grows through the year.
How busy is the mortgage market?
Remortgaging and product transfers have been extremely busy and are likely to continue, according to Hollingworth.
“The bigger question will be how activity in the purchase market grows,” he noted. “That will be important for the market to grow and although it isn’t necessarily something that brokers can control, they can prepare.
“We will continue to work hard to plan ahead and have already reaped the benefit of measures to improve efficiency that have been put in place and helped us grow our share of the market last year.”
READ MORE: What’s the biggest challenge for mortgage clients?
The price war in the early part of the new year has provided better rates for brokers and their customers, Hollingworth pointed out.
“However, advisers are having to work all the harder to make sure customers can take advantage of changes to rates where appropriate,” he said.
“Having access to product transfers is hugely positive but some lenders do need to consider whether remuneration is really supporting the level of work that brokers are now taking on.
“Some lenders, like Halifax, continue to lead on this and we’re now seeing others like Bank of Ireland reducing the gap in fees too. It would be welcome to see more lenders revisiting the current market to show their support and commitment to intermediary partners.”
The L&C Mortgages director believes that customers are going to need advice more than ever.
“We are putting more effort than ever into not only ensuring advisers keep up to date with the changes in the market but also keeping in touch with customers,” he explained.
“Customers may never have experienced a base rate hike before, let alone the volatility of the last couple of years. Helping customers understand what’s happening in the market will be even more important for them and bound to dictate who they ultimately use for advice in future.”
He added: “We believe that by not charging a broker fee we open up the opportunity for more borrowers to have access to mortgage advice, something that is all the more important in an increasingly complex and fast moving market.”
Hollingworth is optimistic about where the market will be in 12 months’ time.
“The market has shifted rapidly and there’s likely to be more change now that we are already in a higher rate environment,” he observed. “More lenders are likely to be tweaking criteria to try and differentiate their proposition, especially as many will find it hard to keep up with some of the big lenders on price.
“That is likely to be good news for specialist lenders but will also see more mainstream lenders add flexibility in a bid to broaden their reach - again advice will be at the heart of this. As rates drop, things should look a lot better in 12 months than they did 12 months ago.”
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