council of mortgage lenders 1 introduction dan corr chair, cml northern ireland regional director,...
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COUNCIL of MORTGAGELENDERS
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Introduction
Dan CorrChair, CML Northern Ireland
Regional Director, Nationwide Building Society
Audit Chair, Co-Ownership
Co-Ownership annual report and strategic review 2005
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Never a borrower or a lender be …
An old adage, has it stood the test of time?
• £351 millions from lenders cumulatively for Co-Ownership mortgages
• No single lender with more than 20%• Local scheme, supported by multiple
local and national lenders• Lenders always represented on the Board
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Impact for NI housing market
• Additional FTBs
• Mainstreaming of Co-Ownership model• In NI• In UK
Lending to NI FTBs 2004
Household income
Purchase price
All FTBs £23,084 £77,000Co-Ownership £15,911 £76,000
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Perspectives on the NI market & affordability
• A mortgage lender’s• Alex Solomon, CML
• A shared ownership specialist’s• Alan Crowe, Co-Ownership
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A Mortgage Lender’s Perspective on the Market and Affordability
Alex Solomon
Senior Policy Adviser, CML and Secretary, CML Northern Ireland
Co-Ownership annual report and strategic review 2005
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What does affordability mean?
• There are two aspects to affordability:• First, the ability to service mortgage debt once you
have bought a home.• Second, the ability to finance entry to home
ownership – e.g. deposit, stamp duty, EA fees, mortgage application fee, legal fees and simple things like buying a bed!
• Will consider each aspect of affordability for first time buyers.
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Outline
• What does affordability mean?
• What does the data tell us about relative affordability in Northern Ireland?
• Is an affordability problem there, building or non-existent?
• Some thoughts on how policy can address affordability constraints.
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House price indices around the UK
100
125
150
175
200
225
250
275
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
England Wales Scotland Northern Ireland UK
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What does affordability mean?
• What do you immediately think of and what is always in the press?• House Price Indices?• Number of possessions?• Writs and originating summonses?
• Fine – but only partial indication of affordability.
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First-time buyer house prices, £
25,000
50,000
75,000
100,000
125,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
England Wales Scotland Northern Ireland UK
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First-time buyer incomes
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
28,000
30,000
32,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
England Wales Scotland Northern Ireland UK
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Indices of first-time buyer numbers
60
70
80
90
100
110
120
130
140
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Northern Ireland UK
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First-time buyer income multiples
1.92
2.12.22.32.42.52.62.72.82.9
33.1
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
England Wales Scotland Northern Ireland UK
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So – is there an affordability crisis?
• For those already in owner occupation – NO –but increases in interest rates are biting.
• But what about fall in FTBs? What about affordability for those looking to enter home ownership?
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Affordability indices for Northern Ireland – FTBs
020406080
100120140160180200220240260
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
House Prices Income Payment as % of Income Initial interest rate
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ROOF Affordability Index
• Data so far has used income of those who actually purchase
• ROOF index uses income of working household – i.e. is a better measure for those seeking to enter homeownership
• Also assumes a standard 15% deposit
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ROOF Mortgage Costs to Income Ratio
8
10
12
14
16
18
20
22
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
England Wales Scotland Northern Ireland UK
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Where do we go with policy?
• House Sales• Recent uncertainty now removed• Changes are sensible and were supported by CML• Will need to wait and see regarding impact on
numbers• Need to watch future threats – e.g. Scotland
• Co-ownership• Successful scheme with full support of lenders• Single delivery channel• Pleased to see certainty of funding – Alan will detail
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ROOF Affordability index around UK
80
90
100
110
120
130
140
150
160
170
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
England Wales Scotland Northern Ireland UK
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Indices of first-time buyer numbers
60
70
80
90
100
110
120
130
140
150
160
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Northern Ireland NICHA
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So – is there an affordability crisis?
• For those already in owner occupation – NO –but increases in interest rates are biting.
• For those looking to move or buy their first home – While not a crisis the fall in FTBs is concerning – as is the increase in relative affordability.
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Where do we go with policy?
• Shared Equity Today – 100% grant funded• England – Homebuy• Wales – Homebuy +• Scotland – Launching HomeStake• Northern Ireland?
• Shared Equity Tomorrow? – Increased Private Finance?
• In England, Wales and Scotland CML is discussing lender equity loans to enhance current schemes.
• Should Northern Ireland join the party?
