Recent figures emanating from the mortgage and housing market suggest that – since lockdown was ended in mid-May – transaction levels have been strong and that (hopefully) all property practitioners are sharing in the benefits that such a situation brings.
In the immediate period after lockdown, the industry dealt with the spike that resulted from the release of pent-up demand, and not long after in July, the entire sector was given a boost by the introduction of the stamp duty holiday for properties valued up to £500,000.
This was always going to act as a catalyst, and it is certainly a positive government-introduced measure that was required and has already delivered.
That said, this is (currently) a limited offer – March 31 2021 being the end date, although our own timetabling suggests that, given the current average time to complete, properties are going to need to be on the market already if they are to have the best chance of benefiting from this holiday.
While we all welcome the strength of the current market, we wouldn’t be human if we weren’t thinking about whether we are doing all we can to benefit from this situation, whether we may have a good three to six months followed by a severe drop in transactions, and whether the ongoing recession has truly impacted us especially with the furlough scheme ending and the new job support scheme coming into place.
Over the next five or so months, there are a number of potential obstacles that will need to be addressed. Otherwise, by this time next year, we could be thinking that the second half of 2020 was a ‘blip’.
To that end, the industry has to work together, and it has to provide tangible solutions in order to give ourselves the best chance of prolonging this period of activity.
There’s clearly a lot we can do in terms of speeding up the transaction process – securing completion in weeks rather than months is achievable, and we continue to push for action in this area, with the use of technology, better upfront information, speedier ID checks, more certainty for sellers with buyer offers, etc.
We at the Conveyancing Association (CA) wholeheartedly support the Home Buying & Selling Group’s (HBSG) recently published pledges which focus on what all property stakeholders can do to ensure the process moves as swiftly as possible.
However, there are clearly other matters that require our concern as well. There’s no doubting we currently have a shortage of higher Loan-To-Value (LTV) products, as lenders face up to ongoing operational issues and seek to address their risk appetite in an economy which may well see big increases in unemployment. This will have an impact on all manner of housing-related fundamentals such as borrower affordability, ability to pay, house prices, etc.
If the stamp duty holiday is to end next year – and I’ll come to that shortly – then we need to make the most of it, especially for first-time buyers who ordinarily would be seeking to take advantage of these conditions, but may currently find their 10% deposit just isn’t enough to get them the mortgage they need.
We have a precedent for action here, with the introduction of the Help to Buy Scheme and its mortgage guarantee element, brought in after the financial crisis. The reintroduction of a new Mortgage Guarantee Scheme is something the CA supports.
Without such government intervention, it’s likely lenders will continue to be averse to lending at higher LTVs in the amounts that we need. When 85% LTV becomes the high LTV norm, then action must be taken – we do not blame lenders for taking this approach but, as in post-Credit Crunch days, government action here will provide greater confidence and help lenders/advisers target those who really need high LTV loans the most, such as first-timers, lower income individuals and key workers.
Further action can also support the ability to keep the housing market moving. As mentioned above, lenders are considering what the ending of the furlough scheme and the start of the new Job Support Scheme will mean practically for jobs, and whether we are looking at an inevitable increase in arrears/repossessions, regardless.
We await to see whether the introduction of the Job Support Scheme provides the necessary confidence to lenders and (rather importantly) provides much-needed time for a further economic recovery that will aid the lot of many employed people who may otherwise be out of work. It is certainly not as ‘generous’ as the furlough scheme and many firms may have already decided to make redundancies.
Finally, we have the stamp duty holiday situation – again, we do not look a gift horse in the mouth but a further extension of this period, perhaps for a year, would take a lot of the worry out of the market and do much to ensure we do not face a cliff-edge situation post-March 31 next year.
We understand the situation changes constantly, but by acting early in these areas it’s possible for the government to take a lot of uncertainty out of the market which will provide the recovery time needed, and help precipitate a quicker move to pre-lockdown ‘normality’. Albeit a normal which will be different to that which has gone before.
Our industry works best when it speaks as one, and on these measures, there appears to be growing support – if the government is able to listen and deliver, then the benefits of a strong housing market and what it can mean for the UK economy should be clear for all to see.
*Beth Rudolf is Director of Delivery at the Conveyancing Association (CA)