New year, new market: Our 2020 outlook
Craig McKinlay (pictured) is new business director at Kensington Mortgages
A 2019 roundup will sound all too familiar to previous years.
While ongoing political uncertainty has slowed down market activity, there’s no denying the mortgage market has remained resilient – despite the numerous bumps in the road.
So, instead of hearing the same old, let’s move forward.
There is, fingers crossed, going to be greater certainty post-Brexit – and the market has the potential to re-boot itself. In an ideal world, here are several mortgage resolutions I would like to see happen in the new year:
The government needs to leave the buy-to-let market untouched. As we all know, there’s been a layering of regulatory changes over the past few years.
Changes to the wear and tear allowance, the introduction of an additional 3% stamp duty surcharge on second homes, and cuts to mortgage interest tax relief mean the buy-to-let market is still adjusting.
However, the private rented sector is invaluable. Younger generations are renting for longer or are doing so out of choice because of the flexibility it offers compared to buying.
We need to ensure the government doesn’t damage buy-to-let further.
A common misconception within the mortgage market is that buy-to-let directly competes against first-time buyers. Facts don’t lie though.
In August this year, first-time buyers reached the highest level since before the financial crisis, according to UK Finance.
Additionally, according to IMLA, professional landlords, with five or more properties, now represent 48% of the housing stock, up from 38% nine years ago.
Current government policy is based on the misconception that if you “kill” buy-to-let, it’s going to help first-time buyers. In reality, there is no negative correlation between the two.
- Stamp duty changes
Stamp duty changes would be a great catalyst for getting the market moving again. This is particularly the case for those considering downsizing.
Many people would like to – at the very least – feel they have the opportunity to downsize, but often won’t follow through on this process due to the high tax costs.
According to Hamptons International, the number of cash buyers in the first half of 2019 was 28%, the lowest levels since 2007 – with a falling number of downsizers cited as a possible explanation.
Extending a stamp duty break to last-time buyers would free up larger properties for growing families and keep the housing market moving.
Tax incentives are therefore essential for homes that are best-suited to those final-stage buyers.
- Build. More. Homes.
The industry is lacking stock availability. While the government has been trying to build the 300,000 new homes needed a year and housebuilding is at a 30-year high, there still isn’t enough choice to best suit people’s housing desires and needs – especially for those further up the ladder.
While certain housing developers are deciding to take on the responsibility themselves by building appropriate downsizing homes, we need to see a greater effort from the government working with these developers and providing the appropriate funding needed.
The Help to Buy scheme has been a fundamental part of our housing market since its introduction in 2013 both for first-time buyers and developers.
The scheme has supported over 210,000 property purchases, the equivalent of £12.46bn and 81% of first-time buyers.
While the scheme has been extended to 2023, we need to see the private sector step in and create its own Help to Buy initiatives before the expiry date.
Technology innovation has been a strong point for 2019. But the role of the broker remains just as important, and there will always be the desire for human interaction when it comes to individuals making the largest financial commitment of their lives.
Aggregators still have brokers behind them.
Technology is not something to be feared. It’s something that can help. And in the new year, we will likely see more technology that streamlines the process for brokers and makes the end-to-end journey more efficient and seamless.
Lastly, more attention needs to be given to self-employed people.
They are increasingly struggling in the housing market and this should be considered a challenge within the industry.
However, the Kensington Affordability Tracker reveals that self-employed borrowers are a safer bet to lend to than first-time buyers.
There is still a lack of awareness by mainstream lenders that self-employed borrowers are responsible and a reliable cohort of individuals.
Ultimately, these are all very big changes to happen, and ask for, in just one year. However, in this market, we all need to be optimists and weather the storm of any further uncertainty.