Boris Johnson has announced a 5% mortgage deposits plan for first-time buyers to transform “generation rent” into “generation buy”.
Speaking at the Conservative Party Conference, he promised that the plan would create 2 million more owner-occupiers in the UK.
The pledge was one of a series of ambitious promises in the prime minister’s speech to the annual Conservative conference. The other plans included a massive increase in wind power, one-to-one tuition in schools and reform of social care.
The plans are currently sketchy on details. We don’t know exactly how it will work or indeed when it’ll launch.
Johnson has reportedly asked ministers to design the plan, which would involve removing stress tests for mortgage applicants, instead of extending “a form of state guarantee” to lenders to de-risk the loans.
Will the plan fix the broken housing market?
Mr Johnson said:
“It was “disgraceful” that levels of homeownership among under-40s had plummeted over recent years, forcing millions of people to “pay through the nose to rent a home which they can’t truly love or make their own”.
Further, he said that he wanted to “fix our broken housing market” not only by building more homes but by making mortgages more affordable, with long-term fixed-rate deals available on a 5 per cent deposit for first-time buyers.
He said this would “give the chance of homeownership and all the joy and the pride that goes with it to millions who currently feel excluded”.
Will the plan turn generation rent into generation buy?
Mr Johnson said that the policy could create 2 million more owner-occupiers in “the biggest expansion of homeownership since the 1980s”.
“We will help turn generation rent into generation buy,” he said.
“We will fix the long-term problems of this country not by endlessly expanding the state but by giving power back to people – the fundamental life-affirming power of homeownership.”
New 5% deposits will require a change to regulations introduced in the wake of the 2008 crash. It aims to take the risk out of the financial system.
Speaking to the Telegraph, Johnson said:
“I think a huge, huge number of people feel totally excluded from capitalism, from the idea of homeownership, which is so vital for our society. And we’re going to fix that – ‘Generation Buy’ is what we’re going for.
“We need mortgages that will help people really get on the housing ladder even if they have only a very small amount to pay by way of deposit, the 95% mortgages.
“I think it could be absolutely revolutionary, particularly for young people.”
Managing director of Barrows and Forrester, James Forrester, commented:
“Today’s announcement will no doubt excite a nation of aspirational homebuyers who have already been sent into a frenzy over the prospect of paying no stamp duty.
“However, for Boris Johnson to claim this will help fix our broken housing market is not only laughable but quite frankly an insult to those who find themselves priced out of homeownership.
James further pointed out that an inadequate supply of housing to meet demand has caused house prices to spiral.
Rob Houghton, CEO of reallymoving, pointed out: “High loan to value mortgages can be risky.
However, he suggested people proceed with caution, consider the risks carefully and think long term about their property choices.
Are you a first-time buyer and looking for mortgage advisor in Leeds? Care4Mortgages, an associate company of Care4Properties, can help you in this regard. Please contact us on 0113 2488181 to speak to one of our mortgage advisors or click here.