The volume of mortgage transactions is currently at 80% of the levels this time last year, with the shortage of first-time buyers seen as particularly damaging.
However, lenders and intermediaries will help reinvigorate the market by focusing on developing their technical skills and continuing to develop innovative products that meet market needs.
This was the conclusion of a session held at the UK Insurance and Financial Services Conference today at the QEII Centre in London. The event is hosted by the Chartered Insurance Institute.
Richard Fox, chairman of the Society of Mortgage Professionals (which is part of the CII Group), said: “It is important that we help the first-time buyer market, where people are often held back by the fact that they cannot borrow sufficient money to get on the housing ladder. This is often because lenders calculate what they are willing to advance on the basis of income multiples. The industry should consider selling on ‘affordability’ rather than multiples, which would increase the size of potential loans in many cases. This is entirely appropriate in a stable, low interest rate environment.”
Stephen Smith of Legal & General said products should be developed to accommodate demand: “There are products available which enable parents to guarantee repayments by their children, increasing the size of the advance. But these are not from mainstream lenders. We should see more activity in this area.”
He suggested that the Government should play a bigger role in helping first-time buyers: “You cannot have a healthy mortgage market with a low number of first-time buyers. Given the importance of mortgages to the economy as a whole, this is something which needs to be addressed as a matter of urgency.”
The session also pondered the introduction of Home Information Packs, which are scheduled to be introduced in 2007. These will oblige sellers to assemble a pack of information for potential buyers, the intention being to accelerate and streamline the house-buying process.
But Richard Fox said there might be an unforeseen effect: “If people have to pay £700 to create an HIP, it will stop people putting their house on the market speculatively, which will reduce the total number of properties on the market at any time and thus have an impact on supply, demand and prices.”
Consideration was also given to the change in pensions taxation which arrives on 6 April 2006. The new rules will for the first time enable those with Self-invested Pension Plans (SIPPs) to include residential property within the scheme. The panel of experts suggested that this might trigger an additional £5 billion of mortgage borrowing during the year.
