Throughout 2025 many in the housing industry, both lenders and builders cast serious doubt on the government’s ability to reach its target of building 1.5 million new homes by the end of the current parliament.
Indeed, nobody is in any doubt that the country is facing a housing crisis – more demand than supply.
That supports prices. A lot. So, what might help the industry build more and better in the New Year and improve affordability?
Well, the market is expecting one quarter if not two quarter per cent interest rate cuts but that is likely to be the end of the current cutting cycle.
VOLATILE AND UNCERTAIN
Trouble is, in the current economic environment, rates are volatile and uncertain, even more so are swap rates on which fixed rate mortgages are priced. Any bad news goes down badly.
Earnings are up a bit for people; more so in the public sector than the private sector. The high end of the market is likely to remain subdued but that is due to politics and economics rather than price.
If mortgage rates fall that might reverse the current trend of rents in the south of the UK being cheaper than a mortgage while in the north and Scotland the reverse is true.
But there is still the biggest barrier faced by first-time buyers to overcome – that of finding a deposit.
BOMAD SUPPORT
That is where the Bank of Mum and Dad comes in and we at the Family Building Society will be launching our new family mortgage early in the New Year.
However, what badly needs to be done is to start to redress the imbalance between supply and demand and make better use of the existing housing stock.
To that end housebuilders should be encouraged if not forced to develop plots they already have planning permission for.
HOUSING DEVELOPMENT
Some estimates suggest that could lead to one million new homes. Therefore, developers should be told “use it or lose it.” In other words. build or the planning will be withdrawn.
In addition, private equity should be encouraged to invest more in housing development, particularly social housing, by backing the refurbishment and repurposing of older residential buildings and commercial properties.
The UK has less institutional investment in our sector than many other economies. And councils should be allowed to borrow to fund the asset that is social housing.
We’ve had a long partnership with a private redeveloper in London to do exactly that. Now we have embarked on funding a more ambitious scheme in Liverpool and elsewhere. So it can be done.
TRAINING FOR TRADE
However, none of this will be completely successful unless we train more construction workers – bricklayers, plumbers, carpenters and electricians.
We see in our younger staff a move away from the default position of going to university. Hopefully 2026 will see a similar move to training for a trade.
Towards the end of 2025 we saw the FCA introduce some deregulation. Any deregulation is a good thing and the removal of the Building Societies Source Book is to be welcomed as it gives smaller societies like ourselves more freedom.
POSITIVE MOVES
We can only hope that the government’s new planning rules combined with incentives for housebuilders to build and lower mortgage rates will see 2026 be less volatile and more positive for the housing sector.
Finally, as we know, a week is a long time in politics but the biggest support the Chancellor has at the moment seems to come from the bond markets.
If she and the Prime Minister go after the regional and local elections that are taking place in May, we can expect borrowing costs to go up which could easily undo all the good that interest rate cuts and any deregulation has done.
