While this year may be drawing to a close, several challenges are emerging on the horizon for 2015. One of the big developments of next year will be the government’s consultation on the Mortgage Credit Directive. The reaction to the MCD has been one of concern from a variety of voices within the industry. Many of the issues raised centre on the idea that while several markets lend themselves to pan-European rules, the lack of uniformity in the mortgage market across Europe will be difficult and costly to implement with no immediate benefits on show. The level to which the directive will be adopted will be finalised in March but I can assure this will not be the last you hear of it.
On a more local front, the big question for 2015 from the position of homebuyers will be whether and when interest rates will rise: with more moderate house price growth possible evidence that the prospect of higher rates have sapped the appetite of many homebuyers. Overall mortgage stock and gross borrowing levels continue to rise, albeit at a slower rate, and all the indications suggest we will see a more moderate rate of growth in the New Year.
Recently a level of nervousness has crept into the market, and with it a slight slowing in demand, but with the prospect of a base rate rise pushed further back, people are likely to feel slightly more confident about house purchases in the New Year. In addition, the changes to stamp duty have been a very positive move, particularly for buyers, which is likely to keep the demand for housing on an upward trajectory. That said, these reforms must be linked to sufficient supply side policies, in addition to proposed new towns to ensure that demand doesn’t outstrip supply.
In the run up to the general election, housing supply is likely to be a front-and-centre issue, with all major parties committing to major changes. Pledges ahead of the general election have prioritised house building, with projected numbers ranging from the Conservatives’ 100,000 homes a year to the Lib Dems’ 300,000 a year by 2030. However, other issues such as skills shortages are likely to put even more pressure on housing supply, with recent research showing London’s biggest building contractors are turning down one in three opportunities to bid for contracts.
Political pledges are always a welcome sign, but turning those words into action is less easy. A cohesive approach will be necessary to ensure real progress, and one of the biggest challenges facing smaller developers is access to finance. The CMA’s inquiry into competition in the SME lending market will hopefully reveal some much needed insight: lending to small businesses is more important than ever, but with FLS data showing falling lending levels, the grip that traditional lenders still have on the market needs to be examined to ensure that SMEs are getting the best possible chance at the finance they need.
While people may be feeling a little jumpy at the moment, reading too much into small changes in data is seldom a particularly profitable pursuit. With the economic recovery gaining momentum, and a general election on the way, 2015 will have its fair share of surprises to offer. Market uncertainty is likely to be temporary, with the quick bounce-back after the Scottish referendum as a good example of how short-lived these trends can be.
Attributed to Charles Haresnape, Managing Director, Mortgages and Commercial Lending, Aldermore
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