Craig McKinlay is new business director at Kensington Mortgages
The mortgage industry is starting afresh. Over the last few weeks, we have seen several lenders, including Kensington, return to the market with 85% loan-to-value (LTV). Confidence and risk appetite are on the rise again.
However, while some arrive, others disappear. And product choice is still nowhere near the levels we saw pre-lockdown. According to Moneyfacts, there are only 76 mortgages available at 90% LTV or above, compared to 1,172 in March 2020.
Help to Buy Wales extended
This is not a criticism. The sheer volume and demand for these products, combined with a limited amount to go round, means lenders must temporarily remove products to maintain service levels.
But the unwanted side effect of this does mean first-time buyers are still facing the challenge of being able to secure a mortgage. We are all aware this is a problem, and we do need to create an action plan together on how we can return to the market with both high LTV choice and maintain service levels. It is a bit like waiting to see who will jump first – and then the rest will follow. As and when lenders take this necessary jump is when we should see a greater drive in consumer confidence.
The government is trying to do its bit now to facilitate this market optimism, and there are two powerful forces driving the mini housing boom: a stamp duty break and Help to Buy extension. These measures have had a significant influence on overall demand – Nationwide’s latest House Price Index recorded the highest monthly increase in over 16 years.
There has also been a boom in new build demand as a direct correlation of the lack of 90% LTV. Borrowers know they may still have a chance to buy a property with a deposit of 5% or 10% if they go down the Help to Buy route. But this likely means some are not turning towards it out of choice. And again, this will create the issue that if there is too much demand for HTB products, this will create the same bottleneck.
It is likely why the government has announced further changes to the Shared Ownership scheme, such as a reduction in minimum share from 25% to 10%. And being a permanent move, instead of temporary measures like the other two, this means the changes should help avoid a double cliff when these come to an end.
While government support will hopefully continue in the months ahead and has no doubt been vital, we cannot rely on this support forever. Lenders need to start thinking beyond the expiry date of these measures, always thinking one step ahead and anticipating where the market will go.