The housing market should be beyond the political

As I write we’re just over a week away from the Budget and, while we can’t possibly know what the main themes and measures will be, I have a sneaking suspicion that the housing and mortgage markets may well have a significant role to play in the Chancellor’s plans.

I’ve already seen some rumours on social media suggesting changes to stamp duty may well be on the agenda again, perhaps increases for overseas buyers but also for those who own second homes/multiple properties.

The latter would certainly put the cat amongst the pigeons in terms of the perceived falls in private rental sector (PRS) supply, and the ongoing ability of landlords to add to portfolios.

Interestingly, this is one of the measures called for by the Jacob Rowntree Foundation’s recent housing market report entitled, ‘Reboot: building a housing market that works for all’.

It suggests the stamp duty surcharge has been successful in terms of disincentivising what it calls ‘unproductive, speculative investment’ and urges the Government to double the charge on investor purchases.

It also wants to see tax breaks removed on short-term lets which it says is currently encouraging many landlords to move their longer-term rental properties into the shorter-term space.

There are also a wide and far-reaching array of recommendations within the report, many of which may take many years to accomplish but I can’t help but admire the ambition within it, and it may well be clear to many people that we have something of a dysfunctional housing market at present – one with some considerable barriers to entry, particularly for first-time buyers.

There is much to laud in the report – and I would urge you to read it – however I will take the opposite view on one of its recommendations which is continued Government-backed support for mortgage insurance on high LTV products, which somewhat ironically we already have.

Perhaps this report was written before the Government guarantee scheme was extended to the end of this year, but clearly this continues to be an ongoing drain on the purse of the Treasury, even when we might justifiably argue that there are better, less expensive, more flexible private insurance options for lenders to deploy.

I fully acknowledge the ‘confidence’ that having the Government as the ‘back stop’ for such loans can deliver, but many lenders are not opting to use its scheme, preferring instead to take the risk themselves or to use private insurers like ourselves.

Certainly, you won’t find me disagreeing with the underlying argument that, by opting for a risk mitigant such as insurance, lenders should be able to offer greater levels of both product and lending to those first-timers who need higher LTV mortgages in order to get on the ladder.

However, I would argue that when you do have the private mortgage insurance option available in the marketplace, perhaps it would be better to signpost lenders in this direction, rather than continue to fund a Guarantee scheme that many participants appear not to want to use.

Overall, however, I think it's clearly laudable to try and find ways to bolster high LTV mortgage product provision, particularly at a time when house prices have come off their highs, and where there may be an opportunity for some people – not withstanding rising rents – to save for a deposit based on those lower property values.

A big part of the JRF report is focused on the ‘opportunity’ that a housing ‘downturn’ might provide in terms of mitigating the problems of such a downturn and ‘[seizing] the political opportunity for lasting reform that a crisis creates’.

Again, I’m not so sure that a ‘crisis’ provides the very best foundations for delivering reform but also accept that there might be no time like the present. Certainly, housing market reform inertia has exacerbated the problem considerably, and sticking plaster solutions tend to come off fairly quickly, often not healing the deeper wound.

There is always an argument to suggest that the housing market should be beyond the political, and we should seek cross-party consensus on what to do. That however appears complete wishful thinking on my part, and therefore perhaps the best we can hope for is a Government that does approach the housing market with at least one eye on the future and which at least attempts to take as many political opponents and stakeholders with them.