3 Reasons for First Time Buyer Optimism

Ahead of the Chancellor’s Spring Budget on 6th March, a couple of things caught my eye in the last few days:

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1. Martin Lewis writes to the Chancellor requesting LISA reform

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He is asking the Chancellor to index link the ￡450k house price cap and to backdate this to 2018. This is a no brainer given that house prices have risen 30% over the period and in 26/32 London Boroughs the average house price for First Time Buyers (FTBs) exceeds ￡450k. In terms of the overall FTB market, this will be limited to those in the areas of highest property prices (though will provide much needed help to them).

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He is also asking for changes to the way the withdrawal penalty applies. Again this is a no brainer as currently, would be FTBs can be penalised by more than the tax credit they have received. This creates a disincentive to take out LISAs which is a shame as otherwise they are a very efficient house deposit savings vehicle.

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2. Rishi Sunak and Jeremy Hunt consider a 1% deposit mortgage scheme for FTBs

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Potentially this could have very broad appeal and really boost the FTB market though it is not without risk (negative equity for example). I say potentially because there is little evidence of FTB willingness to over stretch themselves. Loans on average are 3.36 x income (against a rule of thumb of 4.5) and the average deposit for FTBs is 25% driven largely by a view that bigger deposit = lower interest rates.

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Meanwhile, slipping serenely under the radar in the popular media

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3. Building Society reform proposals backed by the House of Commons

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These aim to allow building societies to compete on a more level playing field with banks when it comes to funding by increasing their lending capacity. Estimates are that this could equate to ￡10bn extra lending. This is forecast to deliver 200,000 extra mortgages.

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This is critical as building societies live by their Purpose and this centres around Home Ownership. For example:

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·???????Leeds Building Society - “To put home ownership within the reach of more people, generation after generation”

·???????Principality Building Society - “To help everyone prosper in their homes at every stage of life”

·?????? Skipton Building Society - ?“Helping more people have a home…”

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Fingers crossed for this reform then.