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Charles Haresnape's Blog

Charles Haresnape Friday, 30 March 2012

Charles Haresnape

Why lenders aren't supporting NewBuy

A YouGov survey commissioned by Countrywide has just confirmed that 42% of all UK adults between the ages of 18 and 34 say that being unable to afford a deposit is the main reason for not buying property.

Hardly a shocking new revelation, but it’s nonetheless an important statistic because it underlines the ongoing plight of first-time buyers. Despite new government schemes being launched and protestations from the large lenders that they are trying to help struggling first-time buyers (their words, not mine), the issues holding back the housing market seems to have changed very little over the course of the past year.

Clearly, I have a vested interest in seeing an upturn in house sales, but the housing market means far more to the British economy than simply bolstering the new business statistics of a few mortgage lenders. Housing sales create jobs in construction, manufacturing and retail and generate revenues for HM Treasury.

And, at a more fundamental level, the construction industry needs encouragement to build more houses. New housing starts in 2011 fell bellow 100,000 at a time when there should be at least 250,000 new houses built each year in order to keep-up with the housing needs of the nation. A healthy housing market benefits everyone, not just lenders.

So why are lenders not doing more to support schemes such as NewBuy?
Unfortunately, large lenders continue to focus on other priorities, such as rebuilding their balance sheets and bolstering their capital ratios. High LTV lending requires more capital to be set-aside, which is why more lenders are not falling over themselves to develop products for hard-pressed first-time buyers.

Smaller and newer lenders, including Aldermore, have both the appetite and ambition to develop new schemes and to participate in government initiatives (as the Chancellor confirmed in his budget speech, when he named Aldermore as one of the founder lenders participating in its flagship National Loan Guarantee Scheme. We’re also in discussions regarding NewBuy). It’s a shame, however, that more lenders aren’t putting their weight behind such initiatives, because they have the potential to make a real difference.

It’s even more of a shame that some financial institutions are pulling out of 95% lending altogether, because not only does this remove an option for first-time buyers, but it also makes those lenders who remain in the 95% market also reconsider their options, as they run the risk of being flooded with higher volumes of new applications. The reduction in 95% lending further underlines the importance of government schemes such as newBuy.

The UK housing and mortgage markets needs every ounce of encouragement they can get, which is why we need to see more lenders supporting initiatives designed to help first-time buyers. And the sooner the better, because we can’t afford to wait another year before we see progress being made in addressing the same old problems.



Liz Jones wrote:

I think if you look into the NewBuy scheme a bit further, you will find that many of the large lenders are actually supporting the scheme - NatWest, Nationwide and Barclays who have all taken sales - and those who aren't currently are in talks with the builders to start the scheme in late April/May including Santander, Halifax and HSBC.  

Thursday, 05 April 2012 13:55 GMT

Dee wrote:

Charles is right here. I bought my first home in 1972 with the help of a 100% mortgage from a Building Society. Since I came into this industry in 1986 I have helped countless people buy their first home, and many have been on 95% and 100% mortgages. I don't know of any who fell by the wayside.

NewBuy seems to have isolated itself as it isn't across the board with all lenders and intermediaries. It should be a standard product but because of it's complexity it should only be available with advice.

Also, another of the "dead and buried" schemes was one of the Homebuys ( I forget the name, they changed so often) where potential buyers could have 30% support on buying a property from the second hand market. NewBuy does what it is designed for - getting people into newbuild properties, but doesn't help chains of people who want to move on. In fact it reduces the chances as it isolates FTBs from chains. The former scheme opened up chains by allowing people to actually sell their homes and move on.

Lenders are currently competing with each other as they are borrowing cheaply and selling with historically excellent margins, so everyone is trying to take their slice of the cake. But very little support for the FTB unless he has a good deposit. And most of the top deals are still thrown at the cherry-picked LTV section of the market, around the 60% level. Looks good as a headline grabber but in reality is available to comparatively few.

If Lenders margins were capped, they would soon be hungry to lend to get the volume necessary for their target profits.

Tuesday, 20 November 2012 09:20 GMT