Mortgage searches on behalf of borrowers using gifted equity or making a concessionary purchase from a family member rose by 75% in August, research suggests.
Analysis by mortgage research and sourcing platform Legal & General Ignite found borrowers continued to rely on help from their loved ones to get on the property ladder in August. Searches for those using gifted deposits also climbed by 35%, according to the research.
Requests on behalf of portfolio landlords climbed by 22% from July to August as buy-to-let investors looked to expand their businesses. Other landlords used financial support to enter the market, as searches for landlord/vendor gifted equity jumped by 18% in August. Additionally, searches for holiday let/Air B&B rose by 22% last month as landlords continued to capitalise on the pandemic-fuelled demand for staycations, Legal & General said.
The August data also confirms ‘visa’ as the most popular criteria used by advisers searching on behalf of clients – this continues to hold the top spot.
Searches on behalf of expats not in the UK and overseas customers climbed by 17% and 21% respectively, showing that foreign buyers are still looking to snap up UK property. With Help to Buy coming to a close, specialist lending also propped up the market in August as many borrowers considered alternative avenues. Searches for discounted market sale increased by 69% in August as buyers looked to purchase a property at a discounted price, while searches for joint borrower-sole proprietor were the third most popular criteria as other buyers considered purchasing a property with other applicants.
Jodie White, head of mortgage products and transformation for Legal & General Technology, said “family gifting has been a common element of the homebuying process for some time now, and our data continues to tell this story, alongside Legal & General’s own ‘Bank of Family’ research. Criteria searches for gifted deposits, gifted equity, and more, continue to dominate our Ignite results, further highlighting the prominent role that family contributions play in supporting the UK’s housing system. At the same time, it's clear that buyers are also relying on specialist products and alternative schemes that make it more achievable to get on the housing ladder amid the ongoing cost-of-living crisis. During what is continuing to be a financially challenging period for many, it's critical that advisers adopt innovative technologies to effectively handle the demand for advice across a wide range of sectors. Advice is critical right now, and advisers have a key role to play in helping buyers access a comprehensive range of options that aligns with their financial needs.”
Government urged to resurrect Help to Buy
The Government is facing calls to resurrect the Help to Buy Equity Loan scheme.
The housing support scheme, which provided a Government-backed loan worth up to 20% to boost a buyer’s deposit for a new-build, closed to new applicants in October 2022 with purchases due to complete by May 2023. But with high interest rates, the continued cost-of-living crisis, significant planning delays and the slowdown in the property and housebuilding market, law firm Dutton Gregory Solicitors suggests further stimulus is required.
Paul Sams, partner at Dutton Gregory Solicitors, said "Help to Buy should never have been scrapped. At present, there is a real danger of a generation of young people being denied accessible home buying opportunities. Meanwhile, the demand for rental properties far outweighs supply. Prior to a decade of Help to Buy, there was Home Buy Direct and First Buy, so how is it right that there is no longer a government initiative to make home ownership a possibility for those without a substantial deposit?
The government’s First Homes initiative enables first time buyers that meet Local Authority criteria to secure a home for 30% - 50% less than its market value, but there are so few of these homes available. Unless there is a new prospect of a widespread first-time buyer assistance on the horizon, the only way forward is for more housebuilders to introduce their own private schemes in order to convert those in the rental trap to new homeowners. I do hope both the Conservatives and Labour will table a scheme similar to the previous Help to Buy within the next 12 months, but it is needed now. Housing developers have been lobbying for its resurrection – should they step up with their own initiative in the meantime when housing is such a national issue? Should it be for the developers to decide this, or the political leaders of this country.”
Sams suggested Government key worker loans could work in a similar way and demonstrate meaningful support to public sector workers. He said "housebuilders could also offer their own private alternatives such as Proportunity, Fairview Homes’ Save to Buy scheme and similar initiatives by St. Modwen Homes and Kettel Homes."
However, current Help to Buy borrowers may not be feeling positive about the scheme as many are struggling to repay both the equity loan portion after the end of the five-year interest-free period as well as higher mortgage rates. Mayor of London Sadiq Khan is calling for payment holidays as analysis shows up to 4,500 London homeowners are at risk of financial hardship as mortgage costs continue to rise and the Help to Buy loan grace periods end.
Analysis by City Hall found thousands of London homeowners could see their monthly bill rise by up to £900 a month as a result of higher interest rates and expensive Help to Buy payments. By introducing a payment holiday, Khan argues, London homeowners with a Help to Buy loan could save on average £3,300 a year.
Khan said “people in London using Help to Buy may be on the housing ladder, but many are on low pay and facing growing levels of economic insecurity. As Help to Buy grace periods come to an end and mortgage rates continue to rise, thousands of London’s recent first-time buyers are facing huge increased in their monthly payments. “Ministers could do something to support these households straight away, by suspending or freezing Help to Buy loan payments, giving people breathing space when they need it most.”
Paula Higgins, chief executive of HomeOwners Alliance, said “the Government can't hang vulnerable new homeowners out to dry. Homebuyers that purchased through the Help to Buy scheme are facing a barrage of soaring costs. Freezing the loan payments as the Mayor suggests could have a significant impact on desperate household budgets at this time.”
The Political Game Around Homeownership
Both Labour and the Conservatives are sparring over the state of the housing market.
As we hit summer next year, expect electoral promises around increasing housing supply and reintroducing schemes designed to kick start the housing market by enabling first time buyers access to the market, in return for your vote. This political foreplay has already started with Labour promising to reinstate housing targets.
Emboldened by the current shambolic state of the property market, housing is an easy target to hit the Conservatives with. House price increases stoked by an unnecessary Stamp Duty holiday has left many struggling to now afford a home. Even with recent price falls, without the low interest rate crutch buyers have become reliant on, many simply can’t afford the same property that they once could, if at all.
This is coupled with low supply levels of rental, social and affordable housing which aren’t due to be restocked anytime soon, due to the Government’s handbrake turn on targets, seemingly bending to the nimby’s middle class will, leaving many disillusioned with the Government and its policies that seem to neglect the many in favour of the privileged few.
Why aren’t the Government building more houses
What every political party knows is they can’t build 300,000 homes now. Build costs have increased whilst buyer affordability has gone down making it financial suicide to build more than is already in the works. Unless developers are working on build to rent or eco-friendly, state of the art commercial property, they are stalling until inflation is stable and there is an election for a party to win using house building as the carrot. Be it tightening green belt lines or developing brownfield sites, something will have to give, along with a few nitrates, but not until buyers can afford to buy.
Why homeownership is so important to politicians
Once on the ladder, studies have shown homeowners are more likely to vote and protect their asset’s worth, whilst also taking an interest in the area around it, than renters. Historically, homeowners gravitated to voting conservative but after their dismal 13 year reign, the public has grown wise to their rhetoric.
Constant policy changes and broken promises have led even the nimby voters who have curtailed many a housing scheme, wondering how their offspring will ever get on the ladder, whilst also firmly remaining in denial about their own involvement. Every party wants to be the party of homeownership for this reason but also because of the money they can claim via taxation from it.
The more house prices increase the better the “incoming” revenue.
Be it capital gains, inheritance tax or Stamp Duty. In addition, homeowners generally spend more than renters, vital when boosting economic growth in times when inflation isn’t bloated.
What’s happened to house prices
Low interest rates had become instilled in a generation’s psyche. For the past 15 years interest rates have decreased in an attempt to stimulate growth. Whilst failing with anything significant here it did bolster house prices with various initiates to bolster them higher (Help to Buy/Stamp Duty Holiday).
Post-Brexit, Covid and the current war, the BoE have voted consecutively, 14 times, to increase rates in an attempt to curb stubborn inflation. The problem now being that many who own their property outright or have fixed at a lower rate are yet to feel this effect. So the few are left with the cheque on behalf of the many who can already afford it.
This also results in a divided market where some need to sell, reducing house prices whilst others stubbornly hold out. But don’t be fooled, all the parties have a vested interest in homeownership and opposition parties will be utilising the Government’s current pickle to their advantage.
Should the Government create schemes or encourage building before an election, the other party can say they were swayed by their political pressure. The public are mere pawns in this political game for control. Both parties are saying the same things at different times with only one agenda – your vote.
Who gets it depends on who you believe will actually deliver.