In advance of the Summer Budget on 8 July, Robin Fieth, Chief Executive of the BSA has written today to the Rt Hon George Osborne MP, Chancellor of the Exchequer. The text of the letter follows:
We are looking forward to hearing the content of your Summer Budget, with an expectation that two of the areas of focus will be housing and productivity.
With relevance to both of these topics the 65+ Pensioner Bond was, as predicted, highly successful with NS&I in a position to offer rates that the private sector could never hope to match. These bonds, whilst clearly providing a benefit to the 65+ investors, also took around £13 billion out of the ‘liquidity pot’ from which banks and building societies draw to lend mortgage funds to UK home-buyers.
Between the start of 2012 and the end of Q1 2015, building societies have contributed £44 billion in net lending to aspirational first time home-buyers and those moving up the housing ladder. This compares to a total of £6 billion in net lending from the whole of the rest of the mortgage market.
Looking ahead, building societies have an aspiration themselves – to grow their mortgage lending to the UK public, both those with mainstream borrowing requirements, and others who have less ‘standard’ needs. These may be because of their age, the fact that they’ve always dreamed of building their own home, or any one of a host of more complex requirements. These are factors that many societies can successfully handle because of their manual approach to underwriting. Building societies accounted for 32% of all new mortgage approvals in Q1 2015.
There is one thing that the Government could do to help societies continue to lend, including to those individuals and groups not catered for elsewhere. It is to signal in the Summer Budget that you anticipate a return to the private sector of a proportion of the £4 billion of Pensioner Bonds that we estimate will mature between January and May 2016. This could be achieved by reducing the NS&I funding target for 2015-16.
We are hugely supportive of what the Government has done in recent budgets to improve the ISA landscape for savers. Building societies hold around 30% of all Cash ISA balances – well above our 20% share of retail savings balances generally. Many of our members are keen to offer the new Help to Buy ISA.
One way to maximise take-up of this innovative product by our members would be to reduce the complexity of the product, which is challenging for smaller providers in particular. This could be achieved, by allowing the HTB ISA to be offered with an annual allowance distinct from the Cash ISA.
If signalled in the Budget, we are happy to do our part by working with your officials to deliver a simple compelling proposition that has the best chance of multiple providers and maximum take-up from aspiring home-owners.