As the Autumn Statement ended, many of us working in the mortgage and housing markets might well have raised an eyebrow and thought, “Is that it?”
The answer to that question is sadly, yes. With a distinct lack of housing and mortgage market-focused measures or policy announcements, it was almost the direct opposite of what many were predicting/hoping for from Jeremy Hunt’s time at the dispatch box.
We did get the extension of the Mortgage Guarantee Scheme, which had already been announced, and we also heard about a focus on speeding up planning applications – again – more money for the Local Authority Housing Fund, and a somewhat odd announcement on how the Government would make it easier for owners to split one house into two flats, as long as the façade of the building remained the same.
Just how this plays into an environment which has spent a long time trying to deliver reform of the leasehold sector, and indeed moving away from leasehold properties in general because of the issues we continue to see, is anyone’s guess. Plus, are more leasehold flats the answer to a lack of supply across the board? I very much doubt it.
This Statement delivered no stamp duty incentives or policy shift whatsoever, nothing for landlords which might have been wishful thinking despite being mentioned pre-Statement, nothing really that is going to shift the dial in terms of meeting housing supply need, and certainly no replacement for Help to Buy which housing builders/developers were no doubt waiting for.
Without any hugely significant housing/mortgage-market measures, we perhaps have to look elsewhere for an inkling of what the next year might bring, and what that could mean for our sector, particularly in terms of mortgage market activity.
The OBR forecasts that inflation will be 2.8% by the end of next year – remember in October it was 4.6% – but it won’t reach the Bank of England’s own target of 2% until 2025.
That is clearly important because, that being the case, it gives the ‘higher for longer’ view on Bank Base Rate (BBR) more credence, and perhaps suggests we should not anticipate the MPC reducing BBR by much, if it all, over the next 12 months.
Now, as we know, this doesn’t necessarily mean mortgage product rates won’t fall further independent of BBR as we’ve seen that happening even without any corresponding BBR drop in the last month or so – but it maybe tells us that any substantial falls in rates to pre-‘Mini Budget’ levels is unlikely to happen in the short-term.
That matters of course to mortgage advisers and their clients because a higher-rate environment is likely to have a real impact on purchase activity – as we’ve seen through 2023 – and will mean affordability remains a real challenge and will be a significant factor for borrowers, particularly those coming to the end of their deals in 2024.
That said, there are other factors particularly swap rates, lender competition and appetite, plus the potential for greater purchase demand – which we might say has been put on hold for some time – which could act as a real incentive in reducing rates further, and acting as something of a virtuous circle in order to increase activity.
It’s why a stamp duty cut or holiday or a shifting of the thresholds again, or even a selective stamp duty cut for first-timers or downsizers, could well have acted as a real catalyst for the purchase sector, and you can’t help but feel this is something of a missed opportunity for the Government, particularly when it comes to first-time buyers.
The fact that large lenders, such as Nationwide, are calling for an independent review into the first-time buyer market and how they can be helped, plus like many others, don’t offer higher LTV loans utilising the Guarantee scheme, perhaps tells you that the Government is not only missing an opportunity here but perhaps funding something that is not desperately required, given the alternative schemes available.
It appears we now must wait until at least the Budget in March before we see any of this close to being on the Government’s agenda.
If the General Election is to be a Spring 2024 one, then we might all believe there will be some rabbits to be pulled out of the proverbial hat come March, and we will be treated to a more progressive, and relevant, series of announcements for the housing market and for our sector. We certainly didn’t get that this month.
Rob Clifford is Chief Executive of Stonebridge