Digging Deeper – High Loan-to-Value Mortgage Lending

Attempts To Solve Constrained Deposit Affordability

Raises Tensions Between Policy Markers And Financial Regulators

A Challenge in Expensive Markets & Will Not Help As Many As Intended

Last week the Prime Minister re-announced the government’s plan to turn “generation rent into generation buy”. This will apparently be achieved by increasing the availability of high loan-to-value (LTV) mortgages with long-term fixed rates. There’s still a lack of detail of how this will work in practice beyond the original Centre for Policy Studies report (PDF) but this note looks at the challenges facing potential first time buyers (FTB) and what impact this proposal could have.

There are three big barriers preventing potential FTBs accessing homeownership at the moment: the unaffordability of housing relative to incomes, the impact of financial regulation following the credit crunch, and the threat of a housing downturn due to the economic consequences of COVID-19 (& Brexit?). However, they all contribute to a single big problem – the need for a large deposit to buy your first home

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Digging Deeper – Housing Supply & Population Density

Poor Data Limits Analysis of New Supply But EPCs Offer Some Insight

Supply Has Increased Most In Areas With Lower Population Density

New housing supply has rapidly increased across England since 2013 but the lockdown will have curtailed construction. Unfortunately, there is a lack of detailed, accurate, and timely statistics on housebuilding. This makes it difficult to assess what type of homes are being built, where they are being built, and who is building them. This is always an issue but especially so at the moment given the likely impact of the lockdown and the need to understand what is and isn’t happening during the recovery. While we don’t yet really know what is happening now, we can look back at what has been happening to housing supply. This note uses individual Energy Performance Certificates (EPCs) issued on new build properties to assess where new housing supply was being delivered with respect to population density. It highlights a big increase in housing delivery in less dense locations since 2013 while city centre delivery has stagnated since 2016.

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