Crunch Mortgages’ View On UK Housing Policy

The current housing policy in the UK has come in for a fair amount of question and criticism in the media and housing/property industry. In this article our property expert Robb West offers his view of its pros and cons and the likely effects for home buyers and renters.

What is the UK Housing Policy

In simple terms the housing policy in the UK since the 1980, and probably even before that, is to build as many homes as possible and then to encourage home ownership.  It sounds simple.  But of course, these things rarely are.  In truth we build far fewer homes than needed, we do not take care of the current stock available and we discourage home ownership by making the lending rules incredibly difficult to understand, so people never know from one week to the next how much they can borrow or how to correctly to budget for it, or what is going to happen to the value of their house in the short term.  This makes people nervous and this makes lenders nervous.  

The general volatility in the market is the real problem. And until the financial markets stabilise, house builders will be unwilling to build the homes needed and lenders will be unwilling to lend, and that creates a difficult housing market.  

Our View

Is there likely to be a housing crash UK? Probably very unlikely. I would suggest that the activity in the housing market is likely to remain subdued for at least the rest of this year, and perhaps longer if – which seems probable – the first cuts in interest rates from the Bank don't happen until well into 2024. A full-blown housing market crash of the sort seen in the early 1990s looks unlikely though because, despite the looming threat of a recession, we still have the lowest unemployment in decades and wages are keeping up with inflation.  It does feel like the current government are trying to force us into a recession, but the indications are that people are riding it out, keeping their heads above water and getting on with the job at hand.  All we need is a period of stability and the housing market will be bullish once again.

What does the future hold?

Property remains the lifeblood of the Country’s economy and if the property market remains strong then the country does well. House Builders want to build, it is what they do.  Lenders want to lend, it is what they do.  And the general population of the Country want to own their own homes, it is what we have been educated to do.  So perhaps despite the best efforts of the government to control inflation by playing with mortgage interest rates, the volatility in the mortgage market will ultimately settle down and we will see more homes being built again and then interest rates settle at a much more realistic rate for a longer period of time.

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