The government’s pledge of £39 billion in grants for affordable housing has sparked concern across the mortgage and property finance sector, with leading voices warning that the injection – while headline-grabbing – lacks both clarity on its scope, timing and also support for first-time buyers in the open market.
Both brokers and lenders told Mortgage Soup that they had hoped for a definitive policy shift to reinvigorate the home ownership pipeline, particularly for younger buyers and key workers.
But while the Affordable Homes Programme will see funding delivered over a 10-year period, the lion’s share is set to support social rent provision – leaving those reliant on mortgage finance largely unaccounted for.
SHOW ME THE MONEY
Francis Truss, Partner at Carter Jonas, said: “The housing industry has been very keen to see the return of Help to Buy or a similar instrument.
“But the Chancellor’s focus appears to be on affordable housing for rent, and there’s a noticeable absence of support for first-time buyers on the open market.”
Truss, whose firm advises developers, investors and housing associations, warned that while the £39bn package may appear ambitious, its substance is uncertain.
He said: “We need to understand whether this is genuinely new money. Compared to the £2.1bn per year provided by Homes England in 2023/24, the new figure equates to just £1.8bn extra annually – and only for the remainder of this Parliament.”
A lack of support for aspiring homeowners could suppress buyer demand.
A lack of support for aspiring homeowners, particularly in the 25–39 age bracket, could suppress buyer demand in already cautious markets, dampening application volumes and slowing lending pipelines.
Alongside this, the government has promised 12 new towns as part of its long-term housing strategy. And while welcomed in principle may pundits are viewing it with scepticism in the absence of clear financing models.
IMPOSSIBLE TO PLAN
Truss added: “Viability assessments for these new settlements are already underway… but with no firm commitment on affordable housing grant levels, it’s impossible to plan for delivery at scale.”
While the Spending Review’s financial transaction budget could – in theory – enable the government to ‘crowd in’ private capital, industry experts say the mechanism for this remains undeveloped.
A long-term funding guarantee would be required to give institutional investors the security needed to engage in new town delivery, which is both capital-intensive and multi-phase by nature.
PLUGGING GAPS
One national mortgage broker managing director told Mortgage Soup: “There’s a significant reliance here on future private investment to plug gaps.
“But unless brokers and lenders can see a clear pathway to home ownership for their clients – particularly in new-build environments – the knock-on effects will be felt across the entire lending chain. It’s nothing short of shambolic.”
And he added: “There’s an affordability crisis on all sides of the housing market. But by focusing solely on rented affordable housing, government policy risks locking in generational rent dependency.”
