The Chancellor’s relaxation of lending policy should be treated with caution according to high profile lettings agency chief David Alexander.
Alexander – whose agency, DJ Alexander, is part of Lomond and is the largest lettings agency in Scotland – says many will welcome help for first time buyers and others this must be combined with more housebuilding, greater encouragement for the private rented sector (PRS), and assurances that this will not lead to an overheating of the property market.
Reeves’ so-called “Leeds Reforms” – while largely focused on the financial markets – also aim to kick start the housing market. They include measures such as more relaxed loan-to-income (LTI) caps, simplified mortgage lending rules to make it easier for existing borrowers to remortgage, and a permanent government-backed Mortgage Guarantee Scheme to secure the availability of high loan-to-value mortgage products in times of economic uncertainty.
David Alexander says: “There is little doubt that a relaxation of the mortgage market will be welcomed by buyers and lenders and will be seen as a boost at a time when house price growth is slowing. However, this needs to be implemented with caution as there is the potential to create a rapid house price boom which will invariably be followed by a bust.”
“The risk is that this is potentially repeating the fairly lax lending that occurred in the run-up to the 2008 housing crash where excessive income multiples were approved, financial checks were less robust, and individuals were encouraged to borrow too much resulting in a price crash which, for many parts of the country, took years to recover from.”
He continues: “Without increased housing supply the danger will be that while more people will be able to access greater funding this will simply be used to pay inflated prices for a limited number of properties. This will result in prices rising rapidly, and a cycle of higher borrowing, greater payments, but no real resolution of the underlying causes of the current affordability issues. The worst outcome for these policies is that it could actually make affordability worse rather than better.”
“The permanent mortgage guarantee scheme does have the potential to be positive. By supporting high loan-to-value lending during economic downturns, this may provide greater stability at a time when growth is absent. But success will depend on how this is implemented and whether it is appropriately monitored.”
Alexander concludes: “The recent Property Market Report 2024-25 from Registers of Scotland (RoS) reveals just how damaging the 2007-08 crash was and how long the Scottish housing sector took to recover. The latest RoS report states that ‘the total market value of residential sales was £22.7 billion in 2024-25, and despite sustained increases in prices over the past 20 years, the market value has not eclipsed the peak of £23.2 billion in 2007-08.’ In fact, average house prices in Scotland peaked in May 2008 at £140,152, fell £23,719 in just nine months, and didn’t return to over £140,000 until July 2017.
“It took over nine years for the housing market to recover from the boom so we must approach any relaxation of lending with caution. It can be very easy to turn the lending taps on but much harder to turn them off.”
