It feels as though no time at all has passed since my last article. However, we are now firmly into 2020 and looking ahead to the opportunities the New Year – and indeed decade – will bring. There is still a lot of uncertainty surrounding the UK’s future stability as we exit the EU, however our sector is feeling positive.
2020 and beyond
While the decisive general election result at the end of last year did much to reduce political uncertainty, there are still significant questions for how the UK economy, and housing and mortgage markets, will fare in 2020 and beyond.
Now with a sizeable majority, we are seeing the government move forward with its plans to withdraw from the UK, though the details of the future relationship between the EU and UK remain to be worked out. Economic growth remains weak, and it is not yet clear whether the pick-up in confidence indicated by various surveys, including RICS poll of surveyors, will translate into increased activity. Several members of the Bank of England’s Monetary Policy Committee are considering cutting rates to support the economy.
Back in December, our Property Tracker survey indicated the detrimental impact the imminent general election and Brexit related uncertainty were having on the property market. However, the Tracker also showed that constraints on borrower affordability were considerable as well, and these issues haven’t gone away, and won’t any time soon with subdued income growth. So even if confidence bounces back, there may be a limit to how much this is reflected in transaction numbers.
Competition between lenders is therefore likely to remain intense – good for buyers! Building societies will continue to demonstrate their flexible approach in serving all parts of the market, including first-time buyers, older borrowers and self-builders.
FPC tools
At the end of last year the Financial Policy Committee found that its housing market tools had limited impact to date. Against steady activity in the housing market, this was taken as reassuring evidence that lenders had not weakened their underwriting standards, otherwise FPC tools would have had more bite.
The FPC’s conclusion is that the financial stability benefits of their tools significantly exceed any short-term costs, and that overall the measures have not constrained a material number of prospective homebuyers from purchasing a home – so these features of the market are here to stay.
We’ll also get more clarity in the coming months, possibly including at the March Budget, over how the government plans to introduce the housing and mortgage policy proposals it set out in its manifesto, including long-term fixed mortgages and what might replace Help to Buy after 2023. We’ll be looking to work with the government to ensure that the mortgage market works well into the future, no matter how uncertain that future might be.
Cladding: some clarity gained from new industry process
One of the myriad ripple effects from the harrowing Grenfell Tower disaster in 2017 is that many people have faced difficulties buying, selling or remortgaging homes within high-rise buildings – classified by the government as anything above 18 metres, or six storeys, tall.
Post-Grenfell, valuers have struggled to value and re-value flats in high-rise buildings due to the lack of clarity about the building materials: What is the cladding made of? Was it installed correctly? What about the insulation and filler materials underneath?
The BSA has worked with the Royal Institution of Chartered Surveyors and UK Finance to develop and publish the EWS1 form that aims to unblock the high-rise mortgage market. The new process requires a suitably qualified expert to assess the composition of a high rise building’s walls. If they are satisfied that the materials used are unlikely to support combustion, and that elements such as cavity barriers have been installed properly, they will be able to sign off the building and pass this assessment back to the valuer.
Each EWS1 form will be valid for five years, and only needs to be completed once per building or block. Although this will help those currently trying to buy, sell or remortgage homes within compliant buildings, it is important that we all recognise this process is not a silver bullet. Properties in more challenging buildings will need remedial works carried out to reduce fire risk before a successful valuation can take place.
To get the market moving again, we urge building owners to be proactive in getting their buildings assessed, and pursue independent testing of external walls if necessary. There’s a long way to go, but we hope that the new EWS1 form and surrounding process will help those who are struggling to buy or sell their homes.
