An estate agency owner who is also a qualified independent mortgage adviser has hit out against the suggestion that lenders may relax their rules for some buyers.
A recent article in the Daily Telegraph revealed that the Bank of England was considering loosening mortgage lending rules introduced in the wake of the financial crisis a decade ago.
The Telegraph suggested that officials were considering softening affordability checks for borrowers which were put in place in 2014 - some time after the banking crash - to make it tougher for some buyers to borrow.
Now Simon Hughes, managing director of Conran Estates and a national advisory council member for The Guild of Property Professionals, says such a relaxation would be wrong.
“Relaxing lending rules would be a bad idea as it could lose control of the market as it did in 2008. Rather than changing the mortgage lending rules, lenders and government need to be innovative with products and build more homes by allocating land and ensuring the planning process is simplified” he says.
“Innovation is the way forward, with low deposits at the forefront of government decision making. Equity Release could be a solution, when priced at a favourable level, as this is a great way for grandparents to leave their legacy whilst alive. It could also reduce their inheritance tax as well. Obviously, this is a high-risk product, and independent advice is key” he adds.
Hughes believes a relaxation could trigger further house price rises, ironically pushing out of the market some of the individuals which lenders and government want to buy.
“Other possible solutions include Help To Buy style products which don’t just cater to new builds, but other types of properties as well. Review the government part of the product and ensure that interest on this portion is delayed more than the five years … There are other ways which buyers can be supported and helped to get their foot in the door without potentially creating a crisis for the housing market in the future.”
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The intent is fair. Only the insane would support measures that might inflate the bubble further.
The answer to the question of utilising less credit, isn't more credit however. If you push for equity release as one assistive measure you push the burden for elderly care costs further into taxpayers. If the house can't pay for bottom wiping later down the line then somebody has to......
Last decade control was lost @2003-2004 with self cert mortgages allied to mortgages higher than the value of the property (absolute bubble territory). On top we had credit cards and loans almost being given away free with happy meals.....
You don't solve affordability issues with credit - not over the medium to long term.
The answer now is what it always has been. Balancing supply and demand.
You want homes to be sensibly affordable? Build the amount you need..... Create the balance. It's really not rocket science - the answer.
The issue is how you get there. We need to match our annual new home requirement with newly built properties that people will buy.
That'll hold prices inline with general inflation instead of the stupid and stratospheric rises seen recently.
The affordability check has always been a sledgehammer to crack a nut. It also takes almost zero account of the ability of a human being to prioritise payments or alter their spending habits.
It’s doesn’t make sense that tenants who consistently pay rent without issue for years are then informed by someone they’ve met 4 minutes earlier that they can’t afford a lower value mortgage payment, on the basis of affordability.
Our lending market needs to mature.
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