New challenge for the mortgage market
For too long, the people who play by the rules and work hard to invest in their family’s future have been stuck in a stagnant market, brought on by the doubling of house prices in the decade from 1997. I believe that we need to do all we can to help them get back on the move – and that lenders have a crucial role to play.
That’s why yesterday when I spoke at the Council of Mortgage Lenders’ annual conference I asked them to do more to open up the mortgage market, helping hardworking families across the country who want to buy or to build a home of their own.
Bringing confidence back to the market
This Government inherited a dysfunctional housing market, with the lowest level of peacetime house building since the 1920s, climbing rents and millions of people having to rely on the hospitality of Mum and Dad before they can afford a place of their own.
We’re doing what we can to put this right in Government, but for the market to fully recover, the hardworking people who dream of buying or building a home must be able to access an affordable mortgage, and know that they can access it.
Too many people have found themselves stuck on the housing ladder, put off applying for their first mortgage because they’ve seen and heard reports about constraints in the housing market or just don’t think they will be eligible.
Nobody wants to repeat the mistakes of the past, which is why the Financial Services Authority has put clear rules in place to prevent just that from happening. But within this, lenders now have the flexibility to lend responsibly and those that are credit-worthy are able to access the finance. Indeed, lenders have told me that 80 per cent of mortgage applications are accepted.
Challenges for lenders
So yesterday I set out four clear challenges to lenders:
First, to help boost confidence by challenging the myths people believe about mortgages. I want to see lenders work to change perceptions so that we can narrow the gap between the actual mortgage market and what people think is the case, so that those looking to buy can have the confidence they need to come forward and apply for a mortgage.
Second, to be clear about what’s on offer to help home buyers and builders find the product that’s right for them. Consumer surveys have shown that potential customers are confused by what’s on offer. I want to see the mortgage industry look at how they can improve transparency, to help homebuyers.
But in this market lenders can also be innovative. The Funding for Lending Scheme is now providing a steady flow of credit, designed to ease the flow of credit and its pricing, and they can use this help to seize new business opportunities in the mortgage market. So my last two challenges are for lenders to look at tapping into new and emerging markets.
After dwindling under the last Government, Right to Buy is now revamped and back on the agenda. The potential discounts for tenants have almost quadrupled in some areas to £75,000, so aspiring homeowners once again have a real chance to invest in their family’s future.
And our concerted marketing campaign has boosted the Right to Buy market place, targeting hundreds of thousands of households to explain the changes. The third challenge for lenders is to make the most of this real opportunity right across the country.
Fourth, and just as importantly, there’s an opportunity for lenders in the self and custom built market, a movement that’s gathering speed. Surveys show that there is an appetite to build, and whether in towns, cities or the countryside, planning authorities are now considering where land can be made available for projects of all sizes.
Some lenders have already responded to this, but with independent predictions suggesting that self build lending will rise by 140% in the near future, I want more lenders to fully consider the opportunities of this market for their business.That could include tailoring lending products for the self build industry, or extending products like Build-Out insurance, which can help reduce lending risks.
As a Government, we are helping the nation’s home hunters – whether they are first time buyers, second-steppers or those taking a less traditional approach to homeownership. The reforms are now in place to help both the supply of homes, and to ensure that appropriate finance is available to those who are credit worthy.
So lenders can now seize these new business opportunities, and help ensure many more people can buy the home that they and their family need.