Economic Uncertainty Driving Housing and Lending Market Conditions

29 July 2019

With May’s UK Finance figures confirming a slow-down in house movers, albeit with a slight increase in first time buyers, there is a clear indication that uncertainty is beginning to affect the housing market. This is backed up by some fairly pessimistic house growth figures with the latest available ONS statistics confirming house price growth down from 1.6% in March to 1.2% in May. This is a downward trend that has continue since the Referendum in June 2016 when the figure was at 8.2.

Whilst purchases continue to remain reasonably flat, the remortgage market is thriving, relatively so, with May 2019’s UK Finance figures confirming nearly a 20% increase in completions compared to May last year. Most of this was straight remortgaging, mostly onto new fixed rates that continue to be at very low rates.

The Government seems to have lost focus on housing policy once again, albeit both PM candidates have pledged new housing stock, again at annual levels that have never been built in recent times. Lack of stock means certain mortgage products are becoming more popular as borrowers consider different options from a traditional house move. In particular, we have seen an increase in interest in Phoebus’ development finance and bridging’ modules which indicates more lenders are looking to help borrowers considering options different from “the norm”.

The ‘build to rent’ sector is interesting, as are self-build mortgages; these increasingly seem to be more of a standard product requirement for post completion servicing, which is something Phoebus facilitates. But, with so much housing stock required are there other options to boost the market?

An obvious place to look is at the new construction types being used, such as modular techniques, which allow houses to be built much quicker and at lower cost. But will these in themselves be problematic? For example, will they automatically sell for less and therefore drag market pricing down? Will lenders accept them as security at their usual LTVs? Can you securitise “non-standard” construction types? These are all relevant questions that need addressing further before new construction types will be fully accepted as “mainstream”.

By the time this is read, there will be a new PM and we will only be three months away from leaving the EU (in theory). At least two of the major areas of uncertainty will therefore have been clarified and so, one would hope, we will have a clearer picture of how our country will be moving forward.

Whether that solves some of the economic and housing market wobbles we are seeing today remains to be seen, as there are probably a lot of other factors yet to properly show up, such as the amount of unsecured debt being taken on in the UK. But, as ever, our industry will deal with whatever issues become apparent as well as undoubtedly keep the borrowers’ welfare at the forefront of all policies.    

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Debbie Staveley
Director and Owner,
bClear Communications

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