Paul Smith, chief executive of Spicerhaart, has called for the return of 100% mortgages and sweeping cuts in Stamp Duty Land Tax including an exemption for first-time buyers – warning that there will be a brain drain from London if there is not drastic action.
In a full page interview yesterday with the Mail on Sunday, Smith said: “The Government is not listening because it has become so dependent on the income from stamp duty.”
He called not just for the scrapping of the tax for first-time buyers, but for cuts in Stamp Duty across the board.
“Home ownership is at a 30-year low and the market has slowed significantly since the Government’s Stamp Duty reforms were introduced. The next Budget is the right time to look again at this tax and tackle our home ownership crisis.
“First-time buyers should not have to pay anything. They are already trying to build up a large deposit. It is simply unfair to force people to this when they are trying to get on the housing ladder.”
Smith argued that 100% mortgages would not equate to risky lending because young professionals have already been paying high rents and mortgage repayments would often work out less.
He said: “If you have people who have been paying rent for years, then why should they have to find a big deposit?
“Deposits on 95% mortgages on the average home are about £14,000 and £25,000 in London. Where are first-time buyers supposed to get that money when rents are so high?
“We’re in danger of seeing the Millennial generation leave London in a mass exodus, causing a brain drain out of the capital as they move away to fulfil their desire to own their own home.”
He went on: “Would-be first-time buyers are trapped. Rents are too high nationwide and in London they are 41% higher than in the rest of the country. Hundred per cent mortgages should be available to those who have a successful track record of paying such rents.
“If you take a property worth £200,000, that may cost about £900 a month in rent. On a 95% mortgage and assuming a 3.58 per cent interest rate, the repayments would be about £800 a month.
“It’s about responsible lending to those with a proven ability to pay rent, but who lack equity due to their housing situation.”
In the same interview, Smith also revealed that he has been lobbying MPs for the last ten years to have licensing introduced for estate agents: “We are the only developed country in the world that does not license estate agents.
“You could walk out of prison and set up as an estate agent.”
Smith also revealed that he is looking at making acquisitions that would take Spicerhaart further into the north.
Well there speaks a man who clearly knows nothing about the mortgage risks associated with a downturn in the economy/houseprices.
What irresponsible comments.
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This is more a call for self interest rather than true altruism, as anyone versed in financial markets knows it will only take a small rise in interest rates and many homeowners would be in serious difficulty. Add a new wave of 100 % mortgage owners into the mix and you have the recipe for repossessions and buyers handing keys back and walking away from the property.
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The mortgage market is overcooked. When a mortgage gets taken out the lender 80% of the time sells future payments on to a SPV (special purpose vehicle) and the bank gets replenished immediately.
The bank just becomes the repayment collector.
Things are overstretched which is why student loans are now being sold on to.
With FTBs on 40 year mortgages rather than us older beasts who had 20/25 years mortgages, its the trickery of banks that need to be taking less.
To have FTBs putting in zero is a crazy suggestion when many areas are seeing prices having to drop back to gain sellers a sale.
Zero FTB entry is negative debt waiting to happen.
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Also Trevor Lenders now have to hold a higher level of equity against the mortgage book, this is called capital adequacy and is strictly controlled by the Bank of England. Most lenders no longer securitize their mortgage book , mainly because the markets don’t want to buy it after the poisoned mortgage backed bond sales during the financial crash which nearly brought the whole market crashing down.
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Mr Smith.
You really are sub prime !
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Surely they’d still get financially qualified even with 100% mortgage.
FAO the outsider I disagree, being that he’s the CEO of the biggest independent in the country I think he knows a thing or two.
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100% mortgages are an invitation to repeat history. No matter how you try and limit its availability many would be offered one and accept. Late 1970’s very early 80’s my normal monthly mortage rate was circa 15/16%. If present interest rates go up even by 1 or 2 percent which they eventually will people will be forced to hand the keys back to the lenders as has happened in the past. Living on too much credit is dangerous.We will not do anyone any favour by offering 100% mortgages.
A fresh approach to lending is one way. Lifetime mortgages or certainly 40/50 year mortgages. People will be working longer as they live longer so why not consider some different ways?
I do feel sorry for the present first time buyers . They needs to be saving much much earlier – in their teens for their first deposit and the lifestyle of almost cashless society means that not handling real money understandably means that younger people never realise what real money is. Pint of beer – swipe the card, take away – swipe the card. Credit card here credit card there. When it was either cash or cheque payment I remember a Bank manager ( yes real ones in those days) saying to me check before you sign a cheque , meaning check you have the money in your account for it to clear.
I wonder what the schools are teaching their pupils about the life skills of understanding money and its value? Does anyone with children out there know please?
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Having reasonable house prices would be a start. *Cue canned laughter”
I wonder if the housing crisis will ever end?
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I echo a lot of the above. If you cannot save up a 5% mortgage should you be trusted with a mortgage?
I would however like a return of a more supervised version of self cert mortgages. They were in essence a good product just taken advantage of by brokers and indeed lenders who did not care how they were sold.
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