Digging Deeper – Mortgage Repayments

As mortgage rates rise, attention is inevitably focussed on what impact they will have on borrowers’ mortgage repayment affordability. However, there is a lack of public data on borrowers’ actual repayments and many of the available data sources are constrained by the assumptions contained within. This note provides a quick summary on some of these sources and suggests that repayment affordability is better than some of them show.

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Digging Deeper – The Death of the Buy-to-Let Mortgage

Booms, Busts, and Tax Changes

Not Dead Yet

More Data Please

The buy-to-let (BTL) mortgage was a key feature of the UK’s housing market in the late 1990s and 2000s. But the last few years have been much tougher for BTL investors and their lenders. There are regular reports suggesting large numbers of landlords are ready to sell up thanks to tighter taxation and tougher regulations. If these reports are true, this would suggest the death of the BTL mortgage. However, while the heady days of the 2000s are long gone, the BTL mortgage still plays a key part in today’s housing market. Unfortunately, our understanding of the exact role of the buy-to-let mortgage in the housing market is compromised by a lack of publicly available data.

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Digging Deeper – The Problem With The New-Build Premium

The new-build market has a mortgage problem. Mortgage lenders are less willing to lend at high loan-to-value ratios on new-build homes than existing ones. They have concerns over the pricing of new-build and how well the price of a new home will hold relative to the market over time. Our analysis looks to investigate whether these concerns are appropriate, the role of the Help to Buy equity loan scheme in bridging the gap between lenders’ concerns and market demand, and what might happen to the new-build market when Help to Buy ends.

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Digging Deeper – Unbuilt Planning Permissions

Calculations suggesting there are over one million unbuilt planning permissions are too simplistic and don’t accurately reflect the realities of planning and housebuilding. Regular analysis comparing the number of new planning permissions and housebuilding completions suggests there are over one million homes with permission but unbuilt in England. The latest analysis is by the Local Government Association (LGA) and suggests that “More than 1.1 million homes granted planning permission in England in the last decade are yet to be built”. This is regularly cited as evidence of developer land banking and that the planning system is not a barrier to housebuilding. Unfortunately, the result is probably too high due to poor data and an overly simplistic calculation.

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Digging Deeper – Land Reg Lag & Coronavirus

Pandemic Leading to Longer Time Lags in Registration

Creates Problems With Short-Term Data & House Price Indices

There has always been a time lag in when transactions are registered with HM Land Registry but the pandemic has increased it. The increased lag creates a short-term constraint on our understanding of the housing market with less comprehensive transaction data and could lead to larger revisions in the ONS house price index.

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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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