Lewis Sidnick: The new Government backed mortgage scheme is bold – but will it work?

Lewis Sidnick is Head of Corporate Affairs at NHBC (National House-Building Council). Prior to this he was Head of Parliamentary Affairs at the British Chambers of Commerce and also has worked for Conservative MEPs in Brussels, and for Conservative MPs at Westminster. (This article is written in a personal capacity).

The Prime Minister today launched the long awaited Government’s housing strategy. With the average age of a first time buyer now reaching 37 years old, and household formation levels at twice the number of homes being built, a new strategy is desperately needed. Will this one deliver and how will its success be measured?

Before the crash in the US housing and credit market that led to global financial downturn, we were building about 185,000 new homes a year in the UK (NHBC figures). The following year this fell to about 85,000 – a 100,000 potential new homes wiped out from one year to the next. Several years later there has only been a fragile recovery.

The PM’s announcement today hits at the heart of the problem and has been warmly welcomed by the industry. A new Government-backed indemnity scheme allowing up to 95% loan to value mortgages for the purchase of newly built home is exactly the type of support the industry needs.

One test will be the impact these policies have on housing supply; another is the help they provide to people wanting to buy. Other key measurement will be:

• The Government has said the new mortgage scheme will 100,000 people buy a new home, but no timeline is clear. If the scheme supports this number in the next few years it will have made a major contribution.
• This initiative should not be traded off against new National Planning Policy Framework, which should not be diluted. There is no need to build on the green belt, but there is a need to simplify the planning system to help build new homes.
• The ultimate test will be whether, by the end of this Parliament at least, we are building the projected 240,000 new homes a year this country needs.

This housing strategy has today been placed at the heart of the Government’s growth agenda and with the PM calling for a “Tory housing revolution”, the political and economic stakes are very high.