The impact of the 2015 election on the mortgage market

Well I don’t know about you but I for one am glad that the election is over with. It was nice to see lots of opinions being thrown about in work, at home and amongst friends down the pub but I am glad that it is now all dealt with and we can all get on with our lives once again.

I think the majority that the Conservatives won by was surprising but then when you consider that the other option was perhaps a coalition with Labour and the SNP I can see why many voters may have made sure that that didn’t happen by voting Tory.

Whatever your reasons and whoever you voted for we all have to go back to work and all have bills to pay and life goes on, that would have been the same under any political party. Without being too opinionated, perhaps, let’s look at how this affects Fox Davidsons’ world in terms of mortgages and housing….

…..As far as the housing and mortgage market is concerned this was a good result. I won’t dwell on the various political parties’ policies but some of them made no sense. Take Labours rent control policy for example; I don’t understand how Labour could have controlled rents given that each property in the UK is different. How can you stop a landlord from increasing the rent on a property he has just done considerable refurbishment to and now wishes to recoup those costs reflected in a more marketable, higher yielding property or how can you tell a landlord to reduce their rent when they have crippling mortgage costs because they now fall foul of the cheapest mortgage lenders lending criteria and cant remortgage to them.

Each case is different and a private landlord should be able to set the level of rent they need to make their business (which is what it is) profitable. Most landlords I know are happy to accept a slightly lower rent than the market would have them charge in return for a decent long standing tenant.

What have the Tories ever done for us!?

With the Conservatives in power we have seen a much more sensible approach to stamp duty making it fairer for the masses. We will later this year see Help to Buy ISA’s, a tax free savings plan where government cash is added to your cash to make up your deposit on a property.

They also announced an extension to the Right to Buy scheme which allows people living in Council houses to buy their properties at a discount. The extension will apply to those renting from housing associations.

The New Build Help to Buy scheme has been extended to 2020 and allows buyers to purchase a home with a 5% deposit whilst also taking a 20% interest free loan from the Government. The 20% is repayable as a % share of the property value on sale. Despite owing the Government a share of your capital gain this is still a good deal and allows buyers to access 75% loan to value products rather than 95% loan to value products so there are further savings to be made on the mortgage terms.

The Government brought in Help to Buy, resulting in a whole host of lenders now lending at 95% LTV safe in the knowledge the Government has their back if the borrower defaults.

Pensions for property

Pensions can now be cashed in and used to buy property giving pensioners the option to invest their savings in property rather than being made to take out an annuity.

Depending on your situation there will be some drawbacks to each of the above schemes but on the whole these are all positive moves and the housing and mortgage market is better for it.

Property prices

The one key area that remains to be tackled is one we have addressed many times and that is the building of new homes which is massively under served. It will be interesting to see what measures are brought in to encourage more homes to built. I fear not enough can be done and it will be this factor that mainly drives up property prices over the next 5 years of a conservative government.

The National House Building Council (NHBC) reported today that figures for Q1 of 2015 show that 40,281 homes were registered to be built which is an 18% increase on Q1 2014. Looking at the split between private and public sector housing there is a noticeable increase in private housing with a 26% year on year rise but a drop of 1% public sector housing.

Greater London saw a fall in number of new houses from 7,896 to 5,622. The South West saw increases from 3,246 to 4,486. In fact all regions of England saw increases of properties built compared to the previous year Q1 figures, with the exception of the North East and Greater London.

Commenting on the latest registration statistics, NHBC Chief Executive Mike Quinton said: “Our figures show an encouraging start to 2015 with new housing registrations up 18% on the first quarter of last year. Housing growth levels remain strong across virtually every part of the UK. “However, we have made it clear that the UK is still building way below the volumes of homes that we need. NHBC looks forward to working with government to ensure that high quality new housing is a top priority.”

Based on Q1 figures and assuming figures remained the same, the UK as a whole in 2015 would build 161,124 new properties which is below the target of 200,000 set by the government in March2015, so there is work to be done but clearly things are heading in the right direction.

As a commercial mortgage broker we secure finance for builders. Development finance is widely available, funding can be arranged for the right builders through certain high street banks or through specialist development lenders.

With a focus on development orders for the building of new homes on brownfield sites and existing changes to permitted development rights we should continue to see some headway made in terms of construction of new build houses and flats in 2015.

Fox Davidson are a UK Mortgage Broker securing finance for clients across the Globe that need Residential, Buy to Let or Commercial mortgages on UK property.

All opinions expressed in this blog are those of Director Wesley Davidson. Head Office: Merchants House Wapping Road Bristol BS1 4RW Tel 0117 9897950