A Conservative housing market — what the election means for homeowners and buyers
The Conservative Party returning to government today with a significant majority will be welcome news for some in the housing market, which has suffered from on-going political and economic uncertainty in recent months.
Others though will likely be more cautious, given the Party has already spent nine years in office.
Where we are now
Currently, aspiring first-time buyers are finding it increasingly difficult to save enough of a deposit to get their foot on the first rung of the ladder, especially in higher capital value markets, notably London and parts of the South East. For those on the ladder, we’ve seen existing homeowners hunkering down, avoiding the uncertainty of a volatile market and choosing to stay put instead of moving. A UK Finance report on the mortgage market out earlier week showed that households are now moving only once every 20 years (down from a high of every eight years in the late 1980s).
There are systemic challenges, such as how the mortgage market can cater for the rise of the gig economy, a mismatch between house price growth in certain areas, the real definition of affordability and a process of applying for a mortgage which confuses and bamboozles us, reducing even the hardiest of us to nervous wrecks. Our polling found 62% of people with a mortgage suffered some form of stress or anxiety during their mortgage application process.
The new Secretary of State responsible for housing will have all these fundamental challenges to grapple with. But let’s take a look at what they promised…
For first-time buyers and homeowners
The Conservative Party made some bold election pledges to appeal to both those with a home, and young people with aspirations of buying, with promises for longer-term fixed-rate mortgages offering greater financial security and stability around mortgage costs.
But, the other pledges on housing policy weren’t the most imaginative: a million more homes of all types, “fairer” shared ownership and “more support” for first-time buyers. Sure, they are the right themes for an effective housing strategy, but need a lot more detail, ambition and focus to be brought to life.
The flagship pledge from the Conservatives on housing was a lifetime fixed-rate mortgage promising to protect customers from longer interest rate risks and make mortgages more affordable. A novel idea for the UK market, products with long term fixed rates and low Early Repayment Charges (ERC) are common in France and The Netherlands, where they have helped bring stability and affordability to the market.
Replicating this could, therefore, be a welcome step in the right direction. But, in the UK these kinds of products have been almost unheard of due to banking regulation and very high switching penalties. Where longer-term fixed products like this do exist in the US and the Netherlands, those governments have had to work closely with industry to implement them with effect. Exactly how a future Conservative government would implement such a pledge is yet unclear…
Buy-to-Let Landlords
The success of the Conservative government at the polls will certainly be the best outcome as far as landlords are concerned, with the proposals that were put forward in the Labour manifesto receiving almost unanimous hostility. For landlords and the 1 in 10 UK adults who have chosen to invest in a second property, detail on the pledges from the Conservatives to abolish ‘no-fault’ evictions and the ability for tenants to have one ‘lifetime’ deposit which moves with them will be eagerly anticipated as to how they will be put into place.
Further pledges to introduce a Better Deal for Renters and encourage innovation through technology in the market will also be closely watched for its impact on a market which for too long has stagnated.
At Habito, we continue to focus on providing the simplest, quickest and most eligible products for those with buy-to-let or portfolio investments. How the government will seek to work alongside industry, consumers and landlords to support almost 5 million private rented properties across the UK, should now be a priority for the incoming Secretary of State.
What next?
Perhaps the single biggest concern is that looking ahead to 2020 and the coming Parliamentary timetable, housing is going to struggle to make it to the top of a very busy priority list, as Parliament grapples with January’s Brexit deadline and the new political landscape following this general election. Until time is found to resolve the core housing issues around affordability and accessibility, fundamental barriers to many people’s dream of homeownership will remain.
