26 February 2024

The Government faces a challenge with young voters. They aren’t voting for the Conservative party. A recent YouGov poll revealed that only 1% of 18-24 year olds intend to support the Conservative party in the upcoming election, with slightly higher but still low levels of support among 25–49 year-olds. Given that those under 34 make up over two thirds of the electorate, Sunak recognises that their support is crucial for electoral success. And addressing the issue of home ownership is imperative if he is to win over their support, as housing consistently ranks as the second most pressing concern for young voters, following only the economy. 

A package for first time buyers  

Against this backdrop, the Chancellor is likely to unveil a home ownership package in the upcoming Budget. Speculation suggests amendments could be announced to the Lifetime ISA (LISA) to make it more amenable for property purchases over £450,000, along with the introduction of Government-backed 99% mortgage schemes. 

Timing-wise, the Government’s strategy appears astute. With young voters potentially receiving up to eight Government bonuses in their LISA accounts before the General Election, mooted for November, the investment seems relatively low-cost for the Government which hopes this sustained support will win favour where needed. 

However, concerns linger about the potential impact of widespread 99% mortgages on financial stability. Regulators at the Prudential Regulation Authority (PRA) are cautious, mindful of the lessons from 2008, and will need convincing that Government guarantees suffice to mitigate risks.  

What is more, a significant omission could undermine the effectiveness and popularity of the package. While assisting first-time buyers with deposit savings is valuable, addressing mortgage affordability is essential to tackle the housing issue comprehensively. 

Labour’s proposed solution 

Rachel Reeves believes she has a solution to that problem. Labour has indicated that it would increase the availability of long-term fixed rate mortgage schemes which it anticipates would remove the requirement for mortgage affordability tests. These can often stress test applicants on their ability to repay at rates of up to 9% and shut many prospective buyers out of the market.  

Long-term fixed rate mortgages are by no means a silver bullet and come with drawbacks for mortgage holders who risk finding themselves unable to enjoy the advantage of falling interest rates in the future. But Labour’s recognition of the complexity of the problem on the demand side (it would most likely maintain the upkeep of the LISA to ensure that it remains fit for the future alongside addressing mortgage affordability) and its commitment to address challenges on the supply side has allowed it to make a convincing case for itself as the party of home ownership, a message which is now beginning to be reflected in the polling. A recent Opinium survey found that 34% of voters thought Labour would do a better job managing housing and house prices compared to just 16% who put their trust in the Conservatives. 

But what has been forgotten?  

Whilst both Labour and the Conservatives have now all but set out their electoral stalls as far as housing policy and first-time buyers are concerned, there remain additional challenges in the broader housing arena that have been left without solutions. Slow progress on the Leasehold Reform Bill and the Renters Reform Bill (the latter is understood to be facing the chop after rebel amendments threatened to water down the Bill beyond recognition) leaves the future landscape for tenants’ rights uncertain.  

Elsewhere, there remains no comprehensive answer to the question of how to open up access to the housing ladder for those on low incomes for whom the LISA does not provide a solution to the challenge of saving for a deposit. And on the supply side, whilst Labour has pledged to build 1.5m new homes, a question mark hangs over the training and recruitment of sufficient skilled workers to deliver on that ambition.  

If you work in the housing sector, we would be interested to hear from you to get your views on the housing landscape and to understand the challenges that you are seeing play out. Get in touch here. 

Cicero is monitoring speculation in the run up to the Budget and will be providing comprehensive coverage on the day. Please get in touch with a member of the team to discuss how we can support your business to navigate the process.