By Benson Hersch, CEO of the ASTL

Margaret Thatcher famously said, “If our people feel that they are part of a great nation and they are prepared to will the means to keep it great, then a great nation we shall be, and shall remain… What then stands in our way? …To those waiting with bated breath for that favourite media catchphrase, the ’U-turn, I have only one thing to say. ‘You turn if you want to. The lady’s not for turning.’”.

Well, today’s Iron Lady inflicted a U-turn on the hapless Chancellor Philip Hammond. He had to reverse the NIC hike on the self-employed, one of the few semi-radical elements of his Spring Budget. All the other elements remain in place, at least for now. However, there’s been no explanation of how the estimated £2bn that this was going to raise is going to be replaced. It seems this was caused by a revolt by some Conservative MPs, illustrating how fragile the government’s majority is, despite the lack of effective opposition by the Labour Party.

Added to this, Nicola Sturgeon has demanded another “Scoxit” referendum. This has been met with resistance by Theresa May. Again this highlights the need for steadfastness and calm as the country enters unchartered territory with no idea of how things will eventually pan out.

So far, the pound has defied gravity, enabling the Bank of England to hold interest rates at historically low levels. This is partially due to the fact foreigners still regard the UK as a safe haven and a good place to invest. In addition, despite recent wobbles, the rise in the value of the dollar has meant UK assets look cheap when viewed through the eyes of investors who think in terms of non-sterling currency.

Although the government has attempted to bring down property prices, they continue to rise, with average house prices now 7.6 times greater than the average income. In fact, following a rule-of-thumb level of a 4.5 times earnings maximum mortgage amount, it means first time buyers without substantial deposits have to find ways of dealing with the problem. They could use the bank of Mum and Dad, either directly or by guarantee, or by using two or more incomes of partners or friends. Perhaps it would be better if interest rates were higher and deposit requirements lower.

The problem of high deposit requirements also means that, despite increasing levels of FTBs who, according to Connells made up more than a third of the property purchase market in February, many will need to rent. Given that the same survey showed that the BTL market fell to a new low in February, accounting for just 8 per cent of property purchases, the inevitable result will be an increase in rentals due to demand exceeding supply. Some youngsters will become ‘boomerang children’, returning to the parental home. However, this is only a short-term solution.

One way round this problem is for buyers to take out bridging loans and then improve their properties to increase their value, so they can deal with lower LTVs. However, this only works where their income is high enough to not just meet present levels of interest, but also higher rates which are used to stress-test affordability.

It is also interesting to note that Gavin Barwell recently tried to woo housebuilders. He is reported as saying, “I don’t want people who want to build unable to do so because they can’t find the sites they want… If you’re struggling to find sites you [can] come talk to me and I’ll try and do something about it.” The problem is not just to build the properties, but to be able to do so profitably. The recently publicised travails of Bovis show that this is not always easy

We certainly live in interesting times. All parties need to hold their nerves and pull together and, as previously mentioned; we need to will the means to keep our country great.

A version of this article was published in the April 2017 edition of Mortgage Introducer