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Budget promises - James Bailey, Henry & James

Mortgage availability

In his recent Budget, Alistair Darling said he was putting pressure on banks to lend more to businesses. That is all well and good but what about mortgages? There is still a severe lack of funding available for homebuyers and although things have improved in the last year, we were starting from a very, very low base.

Much has been made of first time buyers unable to find suitable mortgages but they are not the only ones affected. People at all levels of the market are struggling to obtain home financing. I have heard numerous tales of middle class families looking to make the next move up the property ladder only to discover they cannot borrow the same earnings multiples they once could, forcing them to stay in their current properties. These are often growing families who genuinely need to move but simply cannot.

A lack of financing is also being felt at the upper end of the market. By and large, it is homes priced between £2-3million that are selling – homes that can be bought with cash by financiers flush with bonuses or foreign buyers making the most of the Euro exchange rate. Few homes are selling above £5million and almost none have gone for above £10million so far this year. While the rich may technically be worth a lot, their assets are generally tied up in assets that they are reluctant to liquidate to put into their home. Their cash does not earn money here so they, too, prefer to take out a mortgage.

Developers are perhaps the worst affected. Both niche and larger scale developers are unable to obtain finance right now and this is certainly having an effect in prime central London. The severe shortage of properties available can partially be attributed to a lack of developer finance. No new build developments have been completed in prime central London in the past year despite the demand.

For the housing market to truly recover, mortgage finance needs to be available to buyers at all levels of the market. The current market is overly reliant upon cash buyers and downsizers which is not healthy. Property prices are being pushed up as these buyers compete for too few properties. What we need – and what the government should be encouraging – are mortgages that allow people at all levels of the market to buy. The result would be a greater number of properties coming to the market and a more sustainable recovery. Until banks start lending mortgages as well as business loans, this will continue to be a fragile recovery.

James Bailey

James is head of sales at Henry & James. www.henryandjames.co.uk


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