First-time Buyers

Andrew Bingham Excerpts

Wednesday 14th March 2012 Westminster Hall

[Steve Brine]

Absolutely. We have often debated the future of sub-post offices, pubs and primary schools where falling rolls lead to changes and school reconfiguration. There is a need for new people to enter communities, to regenerate them. I ask hon. Members who are home owners to remember when they first walked into the first house they owned, and the excitement of that. We may remember how exciting it was as a child to play house; but that was playing house for real. I remember how exciting it was, and I want other people to experience that excitement. That is what the debate is about, which brings me back again to that word “values”.

I want to outline the scale of the current challenges to the UK housing market, and the difficulties that young families and first-time buyers experience in taking their first tentative step on to the property ladder. It is a daunting challenge. Since 2008, the number of first-time buyers has declined from a long-term average of about 500,000 a year to just 200,000. One of the key factors accounting for that is, of course, the astonishing rise in average house prices relative to earnings in the past 20 years —even taking into account the slight decline in prices in more recent years. I emphasise the word “slightly” because the situation in the part of the world that I represent may be different from that in some other constituencies.

[Andrew Bingham (High Peak) (Con)]

I congratulate my hon. Friend on obtaining this debate on an important issue that affects so many of our constituents. I am not an expert on house prices in his area, but High Peak is a particularly beautiful rural area, and consequently house prices are disproportionately high, so it is even harder for first-time buyers to get on the ladder.

[Steve Brine]

I thank my hon. Friend, who argues passionately for rural housing in his constituency. The changes that the coalition Government are bringing in—the neighbourhood plans that will be part of the localism agenda, which will work with the council’s local plan—are critical in achieving local buy-in to add stock sensitively and to increase supply in rural areas. That is not to impose, but to enable local planning, through the neighbourhood plan process, to increase supply, so that local people who have grown up in villages can afford to stay in them. That is critical. The new rules that the Government are bringing in, on local allocation, mean that we can make local homes for local people a reality. I know that my hon. Friend will press for that on behalf of the people he represents.

We know from figures from the Department for Communities and Local Government that between 2000 and 2007 the average UK house price more than doubled, from £106,000 to £214,000. For many first-time buyers, particularly those unable to access finance from the bank of mum and dad—a term that I suspect we shall return to over the next 90 minutes—those high prices have either delayed or ended hopes of owning bricks and mortar. In Winchester, the mean house price in the third quarter of 2011 was £368,500, whereas the mean price for England in the same period was just £245,000. The problem is particularly acute in my constituency.

It is a widely accepted fact of economic reality that house prices are high partly because housing is in relatively short supply in this country. As for the future, I know, having listened to Communities and Local Government questions on Monday, that the Government do not like to make forecasts of house building; but they must surely look carefully at what has happened in the past. In 2007, there were 178,000 housing starts, but by 2009—the last full year of the previous Government—that figure had crashed to just over 78,000. In 2011, the first full year of the coalition Government, it had risen to just over 98,000—a rise of 25%—but we are still clearly well short of where we want and need to be. Building more new, affordable homes should clearly be a priority. I hope, for all our sakes, that the new incentive-led, plan-led approach combined with policies such as the new homes bonus and genuine local buy-in through neighbourhood plans will make a significant difference.

As I have said many times in my constituency and in the Chamber, the stick approach to increasing supply has failed. Under the previous Government, house building fell to its lowest level since the 1920s. My aspiration for the new system of localism is simple: local authorities will step up to the plate and stop looking to London for their orders and work with local communities to deliver the homes that their area needs.

When I talk to people in my constituency—I am sure that Members from across the House will recognise this point—it is clear that they recognise the facts; they understand that we need to build new homes because they know that the people who are looking for those homes and who are locked out of the system are their children and their grandchildren. My children are aged four and one, so they are obviously a long way from owning their own home. None the less, that is what I want for them one day—actually at 5 o’clock this morning, I felt that it would be a good idea right now. I want them to be able to stay near mum and dad, perhaps not too near, but relatively near.

People in Winchester do not want housing estates forced on them that are so big that they can be spotted from the lunar surface, and that are without the support services a community needs when it accepts 200 or even 2,000 new homes. They want to be involved. When we involve people, we find that they take the right decision for their community. That is what localism is about; nothing more and nothing less.

I welcome the coalition’s plan to release public sector land with the capacity for up to 100,000 new homes, and the £400 million that the Treasury has put into the get Britain building fund to support firms in need of development finance. I look forward to hearing more from the Minister about her aspirations in that respect.

Although the housing shortage and high prices have conspired against first-time buyers, undoubtedly the biggest obstacle is the size of the deposit that is required before a mortgage can even be considered. The Council of Mortgage Lenders has estimated that the average deposit for a first-time buyer now stands at more than £26,000. That represents 79% of the average annual income from which the mortgage is paid.

A constituent wrote to me last month:

“All the mortgage providers we have spoken to have offered 5% deposit mortgages but these come with massive consequences, such as interest rates which would make monthly payments the same as one of our monthly salaries, or a family member/friend who would invest £35,000 for three years to stand behind the loan. I don’t know about you, but we don’t know anyone who could spare £35,000 that they wouldn’t touch for 3 years, do you, Steve?”

No, Steve doesn’t, and that is the problem; I wish I did.

As the credit crunch took hold in 2007, liquidity dried up and more restrictive lending took hold. Thus, even though house prices have started to fall slightly in recent years in some areas, challenging funding criteria have meant that ever larger deposits are required, making the dream of home ownership for many first-time buyers nothing more than a remote fantasy. Add to that the rising costs of living and job uncertainty, and the picture can appear bleak for aspiring home owners.

In preparing my remarks for this morning’s debate, I asked myself whether we had a Government who were prepared to wash their hands of these young people. Do we have a Government who prefer to walk on by, on the other side of the street, and consign a generation of young people to a life living with mum and dad, which can have benefits; sofa-surfing, which does not have benefits; renting in the social or private sector, which works for many; or even, in extreme cases, homelessness? If I thought for one moment that this Government took that view and wanted to turn their back on young people, I would be their fiercest critic and we would be having a very different debate today. Yes, there are limits to what Government can do, especially with a national debt the size that we have, but there are a number of actions that can be taken to boost Britain’s housing market and to assist first-time buyers in getting a foothold on the first rung of the property ladder.

The most important step the Government have taken to support greater home ownership is their commitment to ensuring that interest rates are kept as low as possible for as long as possible. They are getting to work on tackling the national structural deficit. It is a factor that is easily overlooked, but without a credible plan to put the public finances on a stable footing, the inevitable higher interest rates that would result would also lead to higher monthly mortgage payments and increased repossessions. That key point should never be understated.

As well as maintaining the conditions necessary to secure a low interest base rate, the Government have introduced a range of initiatives designed to support prospective first-time buyers to own their own home. With the sort of timing that I could not have planned for—for the record I did not—two key announcements were made this week. The NewBuy guarantee scheme tackles the deposit problem head on, and I am pleased to see that it is led by the Home Builders Federation and the Council of Mortgage Lenders.

At the launch this week, the executive chairman of the Home Builders Federation said:

“NewBuy will help thousands of people to meet their aspirations to buy a new home, freeing up the housing market and helping first-time buyers and those unable to take the next step on the ladder.”

Paul Smee, the director general of the Council of Mortgage Lenders said:

“These mortgages will help creditworthy borrowers. It is good news for home-buyers and potentially good news for jobs and the wider economy too.”

Mortgage applicants are typically required to give a deposit of between 15% and 20% at the moment, whereas NewBuy makes it possible for first-time buyers and existing home owners to get a mortgage on a new-build property with only a 5% deposit, without all the strings that my constituent told me about earlier. With that new deal, instead of having to save a deposit of between £30,000 and £40,000, first-time buyers will now need only £10,000. The scheme indemnifies lenders against a limited amount of any future losses, opening up mortgage lending and stimulating demand for newly built houses and flats.

Only new homes built by house builders signed up to the scheme will qualify, but I am told that most of the major and many of the smaller builders are in the process of registering. Yesterday, I was encouraging Radian Housing to be part of the scheme, and it told me that it already was, which was excellent news.

Under the scheme, individual home builders will partner up with one or more mortgage lenders who will offer loans of between 90% and 95% on their properties. Let me stress that NewBuy has nothing to do with sub-prime lending, when mortgages were given to people who could not afford the repayments. Mortgages of 95% operated perfectly well in this country for many decades, and the criteria for lending are now much stricter. Nobody will get a mortgage who is not able to pay for it.