How Can You Get on the Property Ladder?
The housing market is subject to fluctuation and in recent years, under scrutiny for being tough on the newer generations due to their difficulty of setting foot on the property ladder. We get in touch with Allan Reece, who is an expert in mortgages; we discuss issues that need to be addressed to improve the mortgage market and he offers unmissable advice to first time buyers.
As an Expert Witness in mortgages, what are common cases you are called for?
Mortgage fraud; lending policies of mortgage providers; advice provided by brokers and other intermediaries; Professional Indemnity cases related to all aspects of lending; valuation fraud; subordinated debt; failure of lenders to comply with legislative and regulatory requirements; protection issues relating to mortgages; banking practice/operations; lending/debt recovery; consumer loans/Consumer Credit Act; sales practices of lenders and intermediaries; credit analysis/approval ratings; lending negligence; debt recovery/realisation; debt counselling; personal insurances; life assurance; medical insurance; credit/financial guarantee insurances.
What do you say is key to becoming a well-recognised and trusted mortgage broker?
To be appropriately qualified and experienced and to always act with the utmost integrity.
To always be open and frank with clients, lenders, conveyancers and estate agents and any other party connected with mortgage lending.
To never make false promises or inappropriately raise client expectations.
To demonstrate empathy with clients showing a clear understanding of their needs, aims and objectives.
To always be available to clients to answer questions that may be raised during the mortgage process.
Longevity: years of experience encapsulating all the changes and aspects of the mortgage market is invaluable in becoming a well-recognised and trusted mortgage broker.
What points of key advice would you offer first-time buyers?
• Seek advice from an experienced mortgage broker before looking for a property to purchase.
• Establish maximum borrowing potential available for first-time buyers in order for them to seek appropriately priced properties.
• To understand clearly how the market works.
• To establish the exact costs required to purchase a property including all relevant insurances.
• Ponder on if the property is in an area where the buyers feel safe walking home at night.
• To view any potential property during the day and at night.
• To view any potential property at a weekend to ensure that parking is not difficult in the area.
• To investigate whether the property or area in question has a reputation for flooding.
• To think if there is adequate schooling in the area.
According to Halifax first-time homebuyers are at the highest level since 2007, what do you think accounts towards this and what else should be done?
One of the major reasons for the increase in the number of first-time buyers is the realisation that low mortgage interest rates has meant that mortgage payments generally are cheaper than renting (particularly in London and the south-east) subject to first-time buyers having a suitable deposit to contribute towards the purchase price. In this regard there has been an up-surge in cases where the “bank of Mum and Dad” provides their children with deposits in order to assist first-time buyers and avoid them having to rent. I am strongly in favour of the Government extending its ‘Help to Buy’ scheme to assist first-time buyers and indeed second-time buyers where appropriate, and I would also recommend that first-time buyers are relieved of the burden of Stamp Duty Land Tax up to a maximum purchase price of £500,000.
What other issues should be addressed to improve the mortgage market?
In my view there are two major areas where the mortgage market can be improved dramatically in addition to removing Stamp Duty Land Tax for first-time buyers. The two areas are as follows:
Estate Agents
There is growing evidence that many estate agents are still indulging in the unethical practice of conditional selling. Many of my clients have reported that in order to buy a particular property the selling agent insists that the purchaser uses their in-house mortgage adviser and their recommended solicitor otherwise the proposed purchaser’s offer will not be recommended to the vendor. It is a practice that was outlawed some years ago, yet it still continues today. Estate agents should be prevented from indulging in this unethical practice and should be properly regulated. The practice of insisting that prospective purchasers only use the estate agent’s in-house mortgage adviser is a clear conflict of interest. Also, estate agent in-house mortgage advisers are rarely able to provide holistic financial advice which, in turn, could severely disadvantage the purchaser. Indeed, the Group Operations Director of a major firm of estate agents recently called for estate agents to be regulated.
The Government
The Government has introduced various policies over recent years which have severely affected the housing market. The changes in SDLT introduced by George Osborne were ill-considered and did not take into consideration long-term consequences. Osborne’s stated intention was to make more houses available for purchase but as so often happens with Government policy he achieved the complete opposite. However, Osborne did succeed in taking more money from purchasers by substantially increasing tax revenue for HMRC despite the number of property transactions falling considerably since the introduction of Osborne’s ill-considered policy. Recently two of my older clients seriously considered down-trading to free up their larger properties but as the cost of down-trading was in excess of £50,000 each they decided to stay in their home of 30 years.
Similarly, the introduction of the 3% surcharge, again designed to free up more properties and discourage individual borrowers from purchasing Buy to Let properties was to the detriment of the rented sector. As a result of the surcharge there has been a significant reduction in the supply of properties to rent which has inevitably increased rents, as supply does not meet demand, and again, the objective set out by Osborne has not been achieved. Philip Hammond has a great opportunity to put things right in the forthcoming budget.
The solution to the housing problems in the UK is very simple as it is a question of supply and demand. Governments over the last four decades have constantly tried to find a solution to the UK’s housing problems. Many schemes have been introduced, some partially successful, some completely unsuccessful. The area of Government policy where the greatest impact on the housing requirements of the UK can be made is in the area of Planning. Governments have consistently failed to introduce Planning Laws that will have a substantial impact on the supply of housing. The current Planning process is unnecessarily complicated and long-winded and places far too much power in the hands of Local Authority Planning Departments. A developer client recently advised me that an application for the development of a small block of flats lodged in March of this year still has not received formal planning approval, despite the planning officer confirming to my client that he had approved the scheme; but the requirement of the local authority concerned was that final approval had to be made by the Planning Committee. The reason the application had not been approved by the Committee was due to the fact that the planning officer could not complete his report for the Committee due to an excessive workload. The application in question will eventually appear on the Planning Committee’s agenda next month having been delayed three months by the failure of the planning officer to produce the necessary report. This situation is replicated all over the UK which makes the housing problem much worse than it need be. By delaying developments, the inevitable effect is that the price of houses in the UK is artificially increased due to the effects of supply and demand and normal market forces.
What motivates you most about your role?
Creating satisfactory outcomes for our clients in a timely and effective manner. Building a long-term relationship with our clients in order to satisfy all their financial services requirements throughout their lives.
Do you have a mantra you live by when it comes to helping your clients?
Reviewing a client’s financial requirements can be very complex as all aspects of a client’s financial life must be taken into consideration. Solutions vary considerably as no two clients or their circumstances are the same and each solution is tailored specifically to the client’s stated aims and objectives. The mantra most common to Allan Reece Associates is ‘there must be a way’. Every effort is made for every client to establish an appropriate plan to suit individual needs.
Allan Reece, Chief Executive, Allan Reece Associates
Independent Financial Advisers and Mortgage Brokers
Web: www.arallp.co.uk Email: allan@arallp.co.uk
Allan Reece is the Chief Executive of a firm of Independent Financial Advisers. Allan’s career spans 45 years in the financial services industry 25 of which were primarily focused in the UK building societies sector. As Chief Executive of Cheshunt Building Society, Allan grew the assets from £70 million in 1980 to £435 million in 1991. Since leaving Cheshunt Building Society in 1991 Allan set up his own financial services practice specialising in mortgages, both residential and commercial. In all Allan has been directly and indirectly responsible for residential and commercial mortgage loans to a value of circa £2 billion during his career. Allan has an intimate knowledge of all aspects relating to mortgages both from a lenders’ and a borrower’s perspective and has acted as an Expert Witness in the mortgage field since 1991.
Allan Reece Associates is a firm of Independent Financial Advisers established in 1991. Allan Reece Associates is a FCA authorised and registered firm of Independent Financial Advisers and Mortgage and Credit Brokers. Allan Reece Associates provides a range of financial advice, management and planning services to individuals and businesses. Services offered are designed to grow and protect the wealth of all clients in the most tax-efficient way possible. Services include the provision of personal and commercial mortgages, business finance, insurance and protection, estate and succession planning, debt management, tax planning, business start-ups and key personnel insurance.
