Andrea Rozario takes a property-related look at this year's Budget and says she does not envy politicans one bit right now...
I don’t envy politicians at the moment. These unprecedented and unpredictable times don’t lend themselves to the nature of modern politics.
One politician I certainly don’t envy is Rishi Sunak. The cataclysmic economy numbers must be tough reading, and figuring out a plan to steer Britain back into the black is definitely a difficult one.
Maybe this is why the media and perhaps even his own party seem determined to give him an easy ride whenever possible - I literally saw a cartoon image of him as Superman during the ‘Eat Out to Help Out’ scheme.
But still, I don’t envy him. In fact, I rarely envy any Chancellor when Budget season rolls around. The speeches always seem to go on forever - the all-time record is 4 hours and 45 minutes - and today’s Chancellors never seem to take up the offer of the boozy nerve-steadier, a tradition that goes back to Victorian times. A crying shame in my books.
Rishi & co have put together a Budget that will look to fight back against the huge 10% nosedive the economy took in 2020, while simultaneously supporting those forced out of work by the pandemic by extending furlough once more.
On balance, I think the Budget seemed measured and carefully considered in the face of an unheard-of challenge. For our industry, the extension of the stamp duty holiday and the 95% mortgage announcements are most certainly newsworthy. And good news at that. The property market has been one of the real areas of solidity throughout this whole period, and helping people on to the ladder, and those already on it stay secure, is a wise move.
Property prices
With everything that has been going on, it is rather remarkable that average house prices nationwide have continued to grow. Commentators and tipsters left and right were falling over themselves to warn of an impending bubble bursting as the pandemic hit, but this hasn’t materialised. In fact, record highs were hit throughout 2020 and by the end of the year average prices were up 8.6% on the previous 12 months, with December seeing the biggest monthly jump since 2014.
Now, the start of 2021 has seen a slight cooling of this house price hot streak - in February average prices dropped by 0.1% - but with this stamp duty news many are predicting another rapid climb.
For my corner of the mortgage market - equity release - this budget seems like it could be well-placed to help our customers do more of what they want with their property wealth - which often is to help their family rather than themselves.
According to recent analysis, some £755m of the total £3.4bn released last year was used to help younger generations get together enough money for a deposit. In these strange times, equity release customers are reaching down and pulling the younger cohort up onto the ladder.
And, as we’ve seen, property has been one of the few solid areas in challenging circumstances, so I am glad our customers can make this happen.
What’s more, beyond the welcome stamp duty news, the budget announcement of government-backed 95% mortgages should mean it’s even easier for more equity release customers to pass on some of their property wealth to their younger family members and help them get on the ladder.
Nearly a quarter of customers are now using lifetime mortgages to help bridge the gap between older homeowners and their younger family, but modern equity release is a diverse and robust market.
There’s still myriad other reasons why people use our products, and things like home improvements, paying off loans, boosting disposable income, funding life experiences or trips and more will always be an option.
In essence, lifetime mortgages can offer those customers for whom it is the right fit, a whole host of ways to make their lives better - but also their children and grandchildren’s lives too.
Ultimately, this year’s budget might have been the most important of all time - even more so than Gladstone’s 4 hour 45 minute marathon - and within it I think there were some pearls that could help our industry.
The stamp duty holiday will certainly continue to support the housing market, and should mean the price stagnation of the first few months of 2021 will soon be forgotten.
Plus, the 95% government-backed mortgages are good news for prospective buyers across the land.
For equity release, I can only foresee more customers looking to access their property wealth to help their younger family, but there are still dozens of other reasons customers could look to the lifetime mortgage.
Andrea Rozario is chief corporate officer at Bower
