Investment and insurance provider Legal & General published its 10-point “Mortgage Manifesto” this week. In it, Legal & General detail 10 ways the government, lenders, mortgage brokers, and borrowers themselves can act to help buck up the mortgage market this year.
Here, we break down these 10 ideas to see how they could improve the UK mortgage market.
1: The government should waive stamp duty for second-time buyers.
We often hear how difficult it is for first-time buyers to get a foot on the housing ladder. However, we do not always hear how challenging it can be to move up the next rung. Some have found stamp duty charges to be prohibitive in this respect. If the government cancelled stamp duty for those wishing to move up the housing ladder, it would encourage many more to move. It would become more affordable to buy larger properties rather than being stuck in small and inadequate ones. This would have a knock-on effect of freeing up cheaper properties for first-time buyers as well.
2: The government should pledge to help build more homes in high-demand areas.
There is little doubt buying property is far harder in some areas than in others. Homebuilding continues apace, but it is not keeping up with demand. If the government stepped in and helped in this area, it would have numerous benefits for the whole housing market. Properties may become more affordable in certain areas, too.
3: The mortgage industry should be more transparent on the availability of home loans.
Greater clarity is required here. Some would-be buyers are confused at the availability of suitable home loans. Anyone looking to buy a property should be made aware of the variety of available loans and how difficult they could be to apply for. Knowing about the challenges in advance means applicants can work to ensure they meet all the requirements.
4: The mortgage industry should work with the government to give long-term renters a better chance of getting a mortgage.
Moving from renting to buying is a huge step – and often an unaffordable one too. Rental costs can eat up much of a person’s budget, making it far harder to save for a deposit. If the mortgage industry put its head together with that of the government, solutions may well be easier to find that would help change this for the better.
5: Mortgage intermediaries should be recognised for offering borrowers the greatest level of choice.
Intermediaries have extensive knowledge of the home loan market. This makes it far easier to provide greater insight into the available options. Borrowers are likely to be presented with more choices than they would find if they looked on their own. Learning more about the services offered by intermediaries could lead to more people taking this route.
6: Mortgage advisors should do more to make the right decisions and fix the best rates.
While the homebuyer must make the final decision, there is plenty an advisor can do to help them. By providing the best advice, support, and input, they can guide an applicant towards the best loan at the best rate. This could potentially save someone thousands over the years.
7: Advisors should do more to make first-time buyers aware of all their options and should help parents help their children onto the property ladder as well.
Buying a property is a daunting task. As a first-time buyer, many will feel overwhelmed at the decisions ahead of them. While many will recognise the need to consider different types of property, some do not give the same consideration to the options available when looking at mortgages. Advisors are well-placed to help in this regard, as they have the necessary experience to guide first-time buyers through what can be a confusing time.
8: Wherever possible, borrowers should seek to overpay or offset their mortgage debts.
Overpaying a mortgage may be challenging for some. However, even the smallest monthly overpayments can hugely influence how long it takes to pay off a mortgage. Clearing the debt sooner means less to pay overall and it could mean clearing the mortgage years ahead of schedule.
9: More homeowners should be taking advantage of the historically low base rate of interest.
Even though we saw two rises in the Bank of England base rate during 2018, the overall rate remains at a very low level. Lenders are also keen to get business from those looking to get a mortgage or to switch from an existing deal to a more cost-effective one.
It is a good idea for all homeowners to check the terms of their current loan. Many would save money every month if they were to switch to a cheaper deal. In conjunction with point eight above, a lower monthly payment would enable more owners to overpay their mortgages to clear them faster.
10: Everyone involved in mortgages should be doing their best to talk up the mortgage market and the wider economy.
It is easy to get sucked into negativity surrounding the mortgage market. Many are exhibiting doom and gloom about the market, about Brexit, and about the wider economy. No one responds well to negativity. If everyone in the market was more positive about things, it could well have a notable effect on the situation. There is much to be positive about too – low interest rates, good deals, competition among lenders to offer the best rates out there. While improvements can be made in other areas, these could arguably be easier to achieve if we all contributed more positivity to the topic.
Some of these points may seem obvious, or at the very least vague, but Legal & General are doing some good service here by pointing out that everyone has a role to play. Making mortgages easier, cheaper, and more widely available is good news for current homeowners and the next generation.