Two years ago, I penned an article in The Parliamentary Review, suggesting that longer-term, ultra-low fixed-rate products for 20-to-50 years could be introduced to help first-time buyers. Since then, this has gradually come into being, with Habito coming to market as the first bank to offer long-term fixed rate mortgages at a repayment period of up to 40 years. Over and above this, other lenders are now entering the market who like Habito can lend up to seven times a person’s salary.
While this is a good thing, if a person could find for instance, a 10 per cent deposit and they were prepared to fix a mortgage for around 20 years, I do not think anyone would assume that the person’s income would be less in 20 years’ time, nor would they assume that the value of their home wouldn’t go up substantially. In this sense, loans of 10 times a person’s income or more could easily be offered, especially if it could be proven that the person had previously been paying significantly higher rent for one year or more.
To illustrate the point, we can look at the example of an adult who owns their own home. What was the value 20 years ago, and by how much has its value and the homeowner’s income soared over the period?
A homeowner today may have had to receive funding from ‘The Bank of Mum and Dad’ to bridge the gap to the purchase price because typically the lender would provide them with four-to-four-and-a-half times their income by way of a mortgage. Now, let’s consider how things would have been if the lender could have advanced 10 times one’s income, since the buyer had a five-to-10 per cent deposit and was prepared to fix the interest on the loan for 20 years. I am left feeling that life would have been a great deal easier in this scenario, and ‘The Bank of Mum and Dad’ would not have had to contribute so much, thereby making everybody’s financial futures much rosier.
Things do still need to change further, but at least there are small steps toward the right direction. One of the few successes to have come out of the last two years through the Covid-19 pandemic was the Stamp Duty Holiday and its extension, for it stimulated the housing market as sales and house prices reached record levels, and it allowed people to move on with their lives, and most probably on an upward trajectory too.
Some months ago, I came across an article which indicated that while the government clearly lost out property-related taxes, they in fact received more income because so many trades, professions and enterprises involved in housing and property benefitted and paid more to them.
As a business leader in the property industry, my view is that we need to restrict people less than we currently do. If there were to be a period of for instance, four years, where Stamp Duty up to a specific level were to be exempt, then everyone could benefit. Furthermore, more people would consider it worthwhile involving themselves in an area of the market which is likely to be operating strongly for a significant period.
Psychologically, a “feel good factor” has been absent for a long time and owners and potential owners would benefit from this. I don’t think you really can put a price on that.
Alastair Kerr is the founding director of Acre Properties (1988) Ltd, a property sales and lettings company based in Chiswick, west London. More information on Acre Properties can be found here.
Photo by Tierra Mallorca on Unsplash
