What The 2017 Autumn Budget Means For First-Time Buyers

Posted by Jamie Mackenzie Smith in Personal Finance on 28 November 2017

Wednesday’s autumn budget brought great news to would be first-time homeowners: if you’re buying a home up to the value of £300,000, you won’t have to pay stamp duty for the property. This, the Conservative Party estimate, will benefit 80% of first-time buyers, saving them potentially thousands of pounds on the total cost.

But that wasn’t the only thing worth taking note of in the budget; there are extra proposals being put forward to help alleviate the burden of making the move into a first home. But is it too soon to start celebrating?

Additional housing support

In addition to removing stamp duty on houses valued below £300,000, the government has pledged extra support for those wanting to get onto the property ladder, moving to raise housing supply to 300,000 per year, the highest level since 1970.

Consultation is set to take place on a policy that will allow local authorities “to permission land outside their plan”, provided that a majority of the properties built are offered to first-time buyers at a discount rate or affordable rent. Further plans will look into the feasibility of allowing commercial buildings to be demolished to make way for more urban residences, but as both of these ideas are set for consultation, they may not even see the light of day.

There’s good news for the construction sector too, as £204 million has been put aside to train additional workers and "fund innovation". This is coupled with plans to try and make the planning permission process faster, but again, these are just in the consultation stage.

In short it looks like the government wants houses to be approved, built and then bought at a significantly faster rate, but will that make any difference to the people that actually want to buy them?

Problems faced by first-time borrowers

These measures go some way to make sure that for first-timers, buying a home is more achievable than it’s been for a long while. But still the age-old problem remains of getting approval to buy the house in the first place.

For a vast majority, with the first house comes the first mortgage and with the first mortgage comes the first mortgage application. This, for the most part is many people’s first foray into the world of credit, and as such haven’t got much (if anything) in the way of a credit history to show. For some lenders is reason enough to decline an application, which seems likely to remain the case even with Wednesday’s proposals in-mind.

This has lead to a rise in the number of guarantor loans and mortgages in recent years, which while often effective, places a lot of strain on the guarantor’s perceived affordability should they want to apply for credit themselves.

Even though most people not living at home may have years of dutifully paid up rental history to their name, in most cases this does not contribute to a credit history. This is something that has been at least in part considered by the government, as an interest in changing the way renters can build their credit score was also touched upon in the budget.

A new way for renters to build up their credit report

Tucked away in the autumn budget (page 63, section 5.30) is a section called "Creditworthiness and rental payment data", which outlines the government’s intention to find a way to help rent payments contribute towards a credit file, meaning that first-time buyers aren’t struggling when the time comes to apply for a mortgage. Set to be run as a £2 million competition, the idea is to get financial tech firms to come up with a solution that will work for people from all walks of life.

On the face of it this seems like a good idea for people wanting to get on the property ladder – and not a particularly new one at that – there are already services out there that will take your rent and forward it on to the landlord, helping towards your credit score as you do it provided you keep up with all the payments.

But blanket introducing a system like this nationwide isn’t without its issues, after all it’s a two way system and a missed rent payment now suddenly appearing as a default on your report would likely become a common problem. Then there’s the issue of getting the nation’s private landlords to adopt the scheme and the immense amount of resource it would take to process applications, payments and day-to-day queries. In short, the system isn’t ready for something like that just yet.

Until we hear any more confirmation of proposals from any of the FinTech groups, it’s hard to say exactly what affect it’ll have for would-be buyers or credit reporting in general. Needless to say, it’s likely that it will be a while before anything comes into fruition.

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