While no one ever expects a Budget to leave them breathless with excitement, the chancellor’s most recent reckoning was one of the most positive that I’ve heard in a few years – particularly for my corner of the industry.
The big headline was the £12bn investment plan for affordable housing.
That’s a sizeable investment that will benefit the whole market, and it’s also a hugely positive statement of intent. Digging into the details, it seems that much of this particular funding has been designated for rapid, off-site manufacturing (kit build). And, while it’s great to see innovation being embraced and quicker construction methods being explored, my request to the industry is that this is delivered in a methodical, planned way. It’s a fantastic amount of money, but there needs to be alignment between the providers and the lenders to ensure that it actually helps the people who need it most .
Elsewhere in the budget, the chancellor promised £1bn of government money in a bid to ensure that unsafe cladding is removed from all private and social housing above 18 metres in height. If you attended our Tea & Affordable Housing event last month, you’ll appreciate that cladding is BIG news in our sector, and as such, I’m incredibly heartened by this development.
It seems that this issue is finally being addressed at the highest level and at TMP we’re also seeing lenders and Housing Associations working (sometimes together) to achieve the results that are desperately needed by the people in the affected properties. The will is there and now it seems as though the money is too. Let’s see what we, as an industry, can achieve.
Helping those on lower incomes
Some more good news. It’s great to see that the government will be paying Statutory Sick Pay from day one of any illness for the foreseeable future. I know this move will be particularly welcomed by those living in affordable housing who tend to be on lower incomes and can’t afford to lose a day’s wages. As an aside, we at TMP The Mortgage People have made the decision to allow our team to work from home while the coronavirus crisis is upon us. We’ve adapted the way we operate (and how we use our technology, for that matter) and we hope that these measures will enable us to deliver business as usual.
In a similar vein, the tax threshold for National Insurance Contributions will rise from £8,632 to £9,500, which means that those earning more than £9,500 will be, on average, £85 a year better off. Perhaps £85 might not be a lot of money to some, but again it certainly helps with many of our customers’ mortgage payments. And crucially, lenders calculate affordability on available income, so I would expect to see this having an effect on mortgage approvals.
Finally – or finally as far as the Budget is concerned – it’s worth noting that the chancellor has announced that the total investment in flood defences in England is to be doubled to £5.2bn over next five years. As an industry, we have seen many housing developments being proposed in flood areas that lenders have been understandably cautious about, and I hope this investment will allow many of those schemes to go ahead.
Which leaves us with a small matter of a surprise interest rate reduction!
Now, this is undoubtedly good news for the economy, but I’m writing this 36 hours after the announcement and at TMP we haven’t seen any lenders dropping their rates by 0.5%. This is unusual but not unexpected, as this is not a planned rate drop. We have heard from a couple of the bigger operators and they are looking to perhaps review their rates in April, but there still isn’t the excitement that surrounds a normal rate drop. It’s an emergency measure.
So, our message to prospective buyers is this: it might feel like a strange time, but right now is probably the safest time to be taking out that mortgage and fixing those payments for the coming years. Rates are really, really low and it’s an opportunity that might not be there for too much longer.
It’s been a good budget. Affordable housing is still high on this government’s agenda and there is a real acceptance that there is a housing crisis out there. None of the positive legislation or funding that was put in place in recent budgets has been overturned and it’s encouraging to see that housing the homeless is an ongoing concern.
Now let’s work together to make things happen.