Creativity is key in tackling Guernsey’s most pressing housing issues

Wednesday August 30, 2017

Guernsey has a unique opportunity to take a bespoke approach to alleviate the biggest issues facing existing and potential homeowners, according to the CEO of Paul Welch.

Last week’s KPMG Guernsey Housing Market Review highlighted the highly concentrated mortgage market as a key focus area, claiming, If one of the existing main lenders exited there would be significant pressure on the remaining lenders which, if not resolved, might risk a decline in credit availability and subsequent transaction volumes.’ handles more than £3 billion of enquiries every year through staff in London, Singapore and Monaco. It offers specific options for first time buyers and later life lending; demographics which were highlighted in the KPMG report as being of specific concern when it comes to housing and lending provision.

More lenders = more options and a better deal for islanders

Mr Welch, who was born and raised in Guernsey and who has recently returned to the island with his family, says; As identified by this report, the Guernsey mortgage market has extremely high concentration and systemic risk. In order to open up the lending market, all lenders should accept business from intermediaries and reward them for doing so. This isn’t happening here as it does in the UK. However, there are signs of change, as Barclays has announced it will soon be accepting business from intermediaries, which is great news.’

The report also recommended; ‘A shortlist of potential new lenders should be approached to understand better their appetite and the barriers they face.’ Mr Welch fully supports this recommendation; ‘I’m speaking with new potential lenders on a daily basis and currently have two new lenders interested in entering the Channel Island market. These are exactly the type of conversations we need to be having to open up the market and create more competition, resulting in a better suite of options for home buyers’.

Guernsey can go its own way

The need to think differently is key, according to Mr Welch; ‘Guernsey could lead the way in using private banks, which have the ability to manage family money. For instance, the parents of a first time buyer may have a significant sum of money locked away in a RATS pension and a child who’s unable to get onto the property ladder. By looking at the finances of the family as a whole, money can be unlocked to help future generations without compromising the security of parents in their retirement. Our exclusive arrangement with the Family Building Society allows for a scenario like this, with first time buyers able to borrow up to 95% of the purchase price with additional security.

First time buyers need more support

Mr Welch believes that the options for first time buyers should not stop there, and the States of Guernsey could run a pilot scheme from Help to Buy/Shared Equity to full property ownership; ‘Doing nothing is not an answer. Guernsey’s mean income is £33,000. Based on Bank of England guidelines, the maximum mortgage that allows is £297,000. The mean house price on the island is £400,000. If young people can’t buy a home in Guernsey, there’s a risk they will leave the island, taking their skills and expertise with them. Again, can we think creatively here? If the States can’t introduce a Help to Buy scheme, can incentives for builders be introduced, both assisting the construction industry and creating vital new housing stock?’

The report recommends removing Document Duty and bond fees for first time buyers. Mr Welch says this should go further; ‘The impact would be much greater if every home below the average house price of £400,000 was exempt from document duty and bond fees. Furthermore, Guernsey should allow bonds held by existing mortgage holders to be transferrable for a flat fee of £1,000. This will allow mortgage prisoners – such as those trapped on high standard variable rates of 6.74% – to move. Lenders could then price to attract business, and homeowners could truly get a better deal.’

More options are needed for later life lending

When it comes to later life lending, changes in legislation need to be considered, I have met with elderly clients who are living on extremely low pension incomes but, due to poor health, the stress of moving home is unbearable. They own property but little else. Those who are asset rich and cash poor should be allowed to benefit from rolled up interest, as there are no lenders in the market assisting them with traditional equity release. The Family Building Society is the only lender that can consider lending up to age 94 but interest has to be serviced.’

Mr Welch welcomed the report and the ensuing conversations it has sparked and urges the States to utilise the findings wisely; ‘The island is uniquely poised to look at its own particular set of issues and take learnings from other jurisdictions to create options which will truly make a difference to its housing and lending market.’




Notes for Editors

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