Boldness is needed to put housing market back on solid foundations

As the market reopens with new safety guidelines, lenders need to join together and discuss how to tackle underwriting in a post-lockdown market. An important area is around the self-employed. Entrepreneurs are the nation’s wealth creators, and the self-employed are a growing cohort. If lenders do not adopt more flexible lending, many will struggle to step on to the property ladder for years to come. Their varied income may be deemed too difficult or too complex.

Rather than trying to factor in the “lockdown impact”, lenders should rule out this period. Once a version of normal trading has resumed (perhaps from July), lenders should assess average earnings over subsequent months. If they are performing steadily then they should use this data along with average income from the year prior and run affordability tests on that basis. A period such as three or four months could be considered “solid trading”, as opposed to several years, which some lenders currently require.

Rebuilding confidence in the housing market will be a huge challenge. Major policy initiatives are required and the industry needs to work closely with government to find innovative and pragmatic solutions to this demand-side collapse. If we do not see any drastic policy measures introduced, the housing market is not going to recover for several years.


Mark Arnold is chief executive of Kensington Mortgages

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