Martin Arnold brings the pensioner together with the first time buyer in this fascinating article.
He is talking in the FT about the work of the FCA, an organisation that is really getting its act together.
It [FCA] also plans to examine how innovative products, such as retirement interest-only mortgages, could help older people raise money against the value of their home or repay an earlier mortgage that is maturing.
Nikhil Rathi, chief executive of the FCA, said in a speech last month that 43 per cent of people were projected not to be saving enough for retirement despite an expected high rate of home ownership.
“How will households meet retirement goals, needs and potential care costs?”
said Rathi.
“Can some of the nation’s £9tn of housing wealth be unlocked more effectively, and put to more productive use, particularly to sustain living standards in later life?”
The FCA said it would launch consultations on its planned rule changes early next year, including measures to encourage artificial intelligence to be used to improve and speed up mortgage advice.
It aims to start making changes by the end of 2026. It will launch a market study to examine
“how the later-life lending market could develop to meet the different needs of future consumers”
including allowing more holistic advice on the range of financial options available to people in retirement.
It’s a question that many younger people will be asking as property remains in the hands of those for whom ownership has no practical value and plenty of liability. The value of property is not going up.
This may seem a good thing for younger people getting on the housing ladder but an ongoing problem when it comes to the properties they want to buy – the leasehold properties – typically flats which have lagged freehold properties in value growth for many years. We need families having the space of large freehold properties, and not to have to live in their parent’s house while saving for what they need.
Recent research by Harry Scoffin of Free Leaseholders suggests that the freehold properties in this country are owned by those of pensionable age and that the failure of these properties to move into the hands of young families is preventing young families from happening – 43% of young couples without children put this down to having no suitable place to afford to buy to bring children up in.
The FCA are quite right to link the problems with property management for pensioners with first time buyers, the property market could become more better for both groups if finance became better available for young and old.
But we also need to confront the problem that faces older people and that is selling out and moving to leasehold properties is not a good bet, especially if you have spent your life moving up not down the property ladder. Moving into a leasehold flat is not a good option for pensioners and we have to do something to give leasehold its good name. It is not a good option for first time buyers either, they are not wanting to buy leasehold flats and the result is a real issue for the FCA.
It is of course a real issue for those who are looking at the financial security of older generations and worrying about the lack of it amongst those much younger. For those of us looking at the issues of pension adequacy, this is a huge problem a generation or two down the line.
“Reforming the mortgage market can help address the fact that as a society we’re saving too little for later life, yet people have huge wealth tied up in property,” he [Nikhil Rathi] said.
The rules on more flexible products, such as “part-and-part mortgages” on which only some of the loan is repaid before it matures, could be made easier to help more first-time buyers get on the property market.
Other changes being considered by the FCA could help those with variable or lumpy income, such as self-employed people, to get mortgages as well as those who have had bad debts in the past but have since improved their credit rating.
Let’s go back to need of space and where we need to live. The FCA should be encouraging behavior that balances young and old people’s needs . I see too many youngsters waiting to buy a house for a family and too many pensioners sitting on freehold property they can’t properly enjoy.
Tonight I attended a fascinating and very timely talk at King’s College London by Michael Teys , one of Australia’s leading strata lawyers, hosted by groundbreaking campaign Free Leaseholders led by the incredible Harry Scoffin .
🇦🇺 inherited English law but flatly rejected the “leasehold” part. “Freehold strata” was the innovative solution, allowing collective ownership of a multi-occupancy building. Something we are missing in 🏴🏴.
The key feature is it does away with the role of an absentee landlord collecting ground rent and wielding power over people’s homes. The owners govern and own the property themselves. In 🏴🏴, even with a resident management company, leaseholders may govern but they don’t truly own and control.
Today, 15% of Australians live in strata. By 2050, it’s projected to be 50%. Banks lend against it. Developers promote it. Disputes are far rarer than in the 🏴🏴 leasehold system. It works and has done for decades, exported now across multiple countries.
“Nobody in England and Wales is expecting utopia with Commonhold. They’re asking for something that already exists so they can own and control their own property.”
As someone who has spent the past few years navigating the sharp end of leasehold, this was an inspiring way to end a tough year. There is a solution. People are pushing for it. Commonhold and common sense will prevail!
Thanks to Free Leaseholders and Michael Teys for an excellent evening.
#Leasehold #Commonhold #LeaseholdReform