Young buyers need more than a stamp duty tax break

Chancellor Philip Hammond’s decision to axe stamp duty for first-time buyers purchasing a home worth up to £300,000, or on the first £300,000 of properties worth up to £500,000, has been warmly received by young buyers.

But critics have rightfully pointed out that this does nothing to address the supply side issues, with the UK still facing a drastic shortage of homes.

The stamp duty tax break also fails to deal with the issue of borrowers being unable to access finance because of their employment status or blips in their financial record.

While the high cost of housing and stamp duty is putting off buyers, there is a large group of underserved borrowers - such as the self-employed - who continue to find it difficult in today’s mortgage market.

Others who are struggling include borrowers have suffered small financial problems in the past. This includes those who have missed one or two payments, even if it was for a small sum, or others who have historic country court judgements to their name.

However, this is enough for many mainstream lenders to exclude a borrower completely. Even if the missed payment was from a mobile phone network or utility company, this can destroy your mortgage chances. The number of CCJs is also rising fast - 900,000 were registered in 2016, a 30% increase from 2015.

For young borrowers who do not have decades of financial history, this can be a fatal blow to their chances of getting a mortgage. Even if their finances have improved since, they will still find it tough to get a loan in today’s computer-driven mortgage market, which often fails to take into account the nuances or circumstances of a case.

Even older borrowers are struggling. We see many people who cannot get a mortgage on the high street after they have been divorced or suffered a bereavement - one-off events which can cause financial difficulty.

There is still a stigma around these borrowers and the industry needs to do more to help these people onto the property ladder. Being self-employed or having impaired credit doesn’t mean you are a bad borrower, and the market should be there to offer support.

The first impaired credit mortgages reached the UK market in the mid-1990s, meaning the sector is now more than 20 years old. These lenders have continued to support wannabe homeowners, even as banks have moved towards the mainstream.
This is also a big opportunity for brokers as many specialist lenders operate wholly in the intermediary space. With options on the high street limited, the modern mortgage broker should be taking advantage and helping their clients find suitable finance.

So while a stamp duty tax break will help borrowers who were already set to buy, there are many more people out there desperate for further support.