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Lenders welcome opportunity to help shape Welsh housing policy


Published: 11 May 2016 | Author: Bernard Clarke

Lenders gathering for today’s CML Cymru annual lunch are pledging to work with the newly elected members of the national assembly on measures to promote the provision of more homes in all tenures in Wales, and in support of a stable and sustainable housing market.

Although Wales has one of the highest rates of home-ownership in the UK, at 70% (compared to 64.7% for the UK), lenders fund housing in all tenures – as they also do across the rest of the UK. As elsewhere, lenders are keen to promote a healthy mix of tenures to meet the needs of local communities.

At 13.5%, Wales has a lower proportion of its population in the private rented sector than any English region (although levels of private renting are lower still in Scotland and Northern Ireland). The proportion of Welsh households living in social rented accommodation is 16.5%, lower than the UK average of 18.1%. Among English regions, only the south west, at 70.2%, has a higher rate of home-ownership than Wales.

The owner-occupied sector

There are now more than 400,000 borrowers in Wales, with total outstanding mortgage debts of around £32 billion. That means that the average outstanding mortgage in Wales amounts to about £80,000.

Lenders welcome the recently announced extension of the Help to Buy – Wales shared equity scheme, which provides £290 million funding to support an extra 6,000 purchases up to 2021. The scheme will continue to operate with a £300,000 price cap and fund a maximum equity stake of 20%.

Wales first-time buyers image

Support from the scheme helped ensure that more people bought properties in Wales in 2015 than in any other year since 2007.  Last year, Welsh borrowers took out 27,300 mortgages for house purchase, with a total value of £3.4 billion and an average advance of £125,000.

First-time buyers took out 13,000 of those mortgages, worth £1.4 billion and with an average advance of £108,000. Borrowing by this group was 7% higher by volume and 10% higher by value than in 2014. And first-time buyers accounted for 48% of all house purchases, a considerably higher proportion than around a decade ago (they accounted for just 29% of the total in 2004).

With affordability in Wales improving compared to the UK overall, and the popularity of the Help to Buy – Wales shared equity scheme, we expect activity by first-time buyers to continue to grow. 

Chart 1: House purchase lending, UK vs Wales, 000s of loans

Chart showing house purchase lending UK v Wales 000s of loans

Source: CML Economics

Download the data

Support for shared ownership

The CML stands ready to work with the newly elected Welsh government on its new housing priorities, which may include proposals to expand access to shared ownership. This could provide vital help for households on lower incomes, including those in the social rented sector who may aspire to own at least a share of their home.

We believe that a single, government-backed shared ownership model for Wales would be the best option, and are ready to work with the new administration to ensure any new approach to shared ownership works for lenders, and can be supported by them. We believe that the government should accept, however, that, for many, part or shared ownership may be a tenure in its own right, rather than a stepping stone to full home-ownership.

We would urge the new government to focus on models for shared ownership and shared equity that are tried and tested, and which are constructed in ways that lenders are able to support. With shared ownership, for example, lenders need a standard, model lease, stipulating a minimum share of the property that the occupier can purchase.

The private rented sector

Lenders have helped support the expansion of privately rented accommodation through buy-to-let lending. Across the UK, however, this is now under threat, given a combination of higher taxes and an increased likelihood of regulatory intervention. 

Additionally, changes to the legal framework for tenants introduced by the Renting Homes (Wales) Act could undermine the confidence of lenders to invest in the sector. In particular, lenders would want to be re-assured that they would be able to take possession of a property in cases where a landlord has defaulted on the mortgage.

Private renting may be the only choice available to those for whom owner-occupation or social renting is not an option. So, measures that deter buy-to-let lending could thwart the Welsh government’s desire to promote a sustainable housing supply with the right balance of tenures. 

Social housing

CML members have already lent more than £3 billion to fund social housing in Wales, and we would urge the new government to continue to uphold robust and appropriate regulation of housing associations. This is essential if the government wants to encourage firms to provide future funding for the sector at the attractive rates that have been available in the past. Firms will need to be re-assured that any planned changes in regulation of the sector do not present a threat to lenders’ interests.

The Office for National Statistics is to undertake a review of Welsh housing associations. We are ready to work with the new government on any measures that it decides to take forward, to seek to ensure that firms are encouraged to provide future funding for the sector.

  • As well as elections to the Welsh assembly, there were polls for new members of the Scottish Parliament, and the Northern Ireland and London assemblies last week. The main manifesto pledges for all four elections are available on our Politics page.