Brian Murphy is head of lending at Mortgage Advice Bureau
With much of the content leaked in advance there were no surprise announcements for the mortgage industry in the Budget announcement.
From the perspective of the housing market, the headline announcements were that a 15% rate will be payable for those selling through a corporate “envelope” and Stamp Duty has jumped from 5% to 7% on properties worth more than £2m bought by individuals.
The good news is this falls some way short of a “mansion tax”, but having said this, the impact will not be inconsiderable as the market in the South East and particularly parts of London has been very busy of late.
However it was encouraging to hear the Chancellor reiterate his pledge to support first-time buyers by using its balance sheet to underpin the NewBuy scheme. This scheme really could have a positive impact across the whole market. And taken in conjunction with the recent reinvigoration of the right-to-buy initiative and the news in the Budget that an extra £150m of funding has been earmarked for the Get Britain Building scheme and we have good reason to be optimistic that the rest of the year will continue to deliver increased activity levels.
We have now clearly set out our intention to capitalise on this with the recent announcement that Mortgage Advice Bureau has completed the acquisition of Mortgage Talk. This combined entity is now a very strong national player in the mortgage market with over 500 advisers. Mortgage Talk is very strong in the new build area and this is definitely an area where we are planning serious expansion this year.
As such the announcement of the NewBuy scheme is going to make things very interesting in this sector. The end of the Stamp Duty concession for first-time buyers on March 24 has caused some commentators to raise fears this good start would peter out, but I don’t believe it was the sole reason for rising business levels anyway.
I think that lenders launching products with higher loan-to-values and loan rates which are still rock bottom in historical terms are more of factor, and therefore I have high hopes for the impact of the NewBuy scheme.
David Cameron says he hopes NewBuy will unblock the housing market and this is a good sound bite but it’s certainly not a panacea. A combination of the State and house builders will guarantee 95% loans up to £500,000 on new-build homes, and there is enough enthusiasm already to say that it will provide a noticeable stimulus to the building market and through them first-time buyers and the wider economy.
However not all lenders are convinced about the merits and not all first-time borrowers will be able to meet the criteria. The proposed mortgage indemnity scheme is not without its critics who worry about it being a “quick fix”. They say it could see new borrowers move straight into negative equity, as it will potentially cause a short-term fillip in new house prices which comes down again when people move in. And that it may not be enough to kick-start the house building sector.
We support the scheme as we believe it will help first-time borrowers struggling to raise a large deposit. But it’s not available to just anyone, and there has to be some evidence of saving for a deposit – people need to have saved a deposit of between 5% and 10%. As I said earlier, I think higher loan-to-value deals are more effective at releasing pent up demand for mortgages, and the Government’s commitment to 100,000 NewBuy mortgages will inevitably have a positive effect on the building sector and through to the wider economy.
The initial rates look OK, with two-year fixes available at 95% from 4.99% through Woolwich and five-year fixes available at 95% from 5.99% through Nationwide.