Lack of mortgage lending is impacting retail jobs, says BRC
New analysis by the British Retail Consortium and mortgage insurance provider Genworth has revealed that a lack of mortgage lending for first-time buyers is impacting the UK retail industry and the number of jobs in the sector.
The organisations said that constricted lending is having a detrimental effect on sales in DIY, gardening, home wares, furniture and floor coverings which accounted for £34 billion in sales in 2011. A trend analysis over an eight-year period from 2005 to 2012 showed a strong relationship between lack of mortgage lending and falling sales on the high street.
Angel Mas, CEO of Genworth's mortgage insurance business in Europe, explained: "A lack of lending leads to lack of productive spending that's impacting the economy and jobs. Close examination of the data we have on mortgage lending uncannily mirrors falling retail sales on the high street over the same period and this is statistically relevant. In particular, sales of DIY, gardening, home wares, and furniture and floorcovering products have fallen by 5% since the start of this year and could have fallen by more than 10 per cent by the end of 2012."
He continued: "First time buyers are the lifeblood of the housing market. From an economic perspective, it's not in our best interests to disenfranchise a generation of aspiring home owners who could afford to repay their mortgages but are excluded because they can't meet a prohibitively high deposit threshold.
"What needs to happen – and quickly in order to stimulate the economy as well as protect jobs – is that lending to FTBs should be increased in a prudent way. Appropriate risk mitigation measures that protect lenders, such as mortgage insurance, can play a fundamental part in minimising the risks of this kind of lending to commercially acceptable levels."
Stephen Robertson, director general, British Retail Consortium, added: "Home ownership and the availability of mortgage credit are crucial to macro-economic recovery, together with the three million jobs in the retail sector – the largest private sector employer in the UK. BRC data demonstrate just how strongly house-buying drives the sales of furnishings and home wares.
"Our latest figures show housing-related retail sales are the worst in over a year, confirming that renewed weakness in the housing market is having a deep impact on high street spending levels, which in turn affects jobs in retailers and suppliers.
"If measures announced to support construction, by relaxing planning rules, boost the housing market recovery they will also help retail sector."
Genworth and the BRC predict that the current depressed levels of mortgage lending could lead to more retail casualties and threaten thousands of job in the sector.
In Genworth’s recent poll of MPs, which explored their attitudes towards mortgage finance and the impact it was having on the economy, 87% of those surveyed said that more needed to be done to help first time buyers get on the housing ladder than was being proposed.
Both Genworth and the BRC said they welcomed schemes such as Funding for Lending as well as other initiatives announced this month, but stressed that the private sector holds the key to kick starting recovery with a focus on first time buyers being very important.
The organisations said that banks and building societies have an opportunity to acquire new customers as well as have a significant impact, more than any other measure currently being considered, to stimulate retail sales in the DIY and home improvement sector and potentially help create new job opportunities for workers in the sector.
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