Boris Johnson’s commitment to “turn generation rent into generation buy” through a significant increase in low-deposit mortgages for first-time buyers has been welcomed by NAEA Propertymark.
The prime minister told the Conservative conference yesterday that the government would look to create significantly more owner-occupiers through a range of long-term fixed-rate 95% loan-to-value mortgage products.
There has been a sharp decline in low-deposit mortgage deals, with Moneyfacts reporting that there was a 93% fall in the number of mortgage of deals worth at least 90% of a property’s value in September, when compared with the corresponding month last year.
But the PM’s change in tone by promoting a generation of renters to become a generation of buyers is good news as far as Mark Hayward, chief executive of NAEA Propertymark is concerned.
He commented: “We encourage lenders to come on board and support this initiative to enable first-time buyers to enter the property market by future proofing the financial burden many face.
“We want to see intent become action quickly so that first-time buyers can make the most of the current stamp duty holiday and continue to stimulate the housing market.”
But the banking industry has warned against what it sees as irresponsible lending following Johnson’s statement.
Eric Leenders, managing director of personal finance at banking trade body UK Finance, is among those concerned by the lack of details provided by Johnson, while a government spokesperson failed to confirm any details of the proposals, such as whether the state would guarantee these higher risk mortgages or what the length of the home loans would be.
Leenders said: “Firms have a duty to lend responsibly and consider the affordability of the mortgage in the long term, helping customers to avoid the risks associated with negative equity.”
err how? having a mortgage is great if there is something to buy.
With a lot of the FTB suitable stock snuffled up by over 55 pensioners into small BTL portfolios, who are enjoying inflating asset prices on their investment and no shortage of tenants, even with section 24 the pension income is still greater than annuities are paying out. That rules out a whole wedge of supply coming to the market
First time sellers put their property on the market get more than they were hoping for and are immediately in the same position as errrrr a whole lot of others.
Massively increasing demand by removing the dampner the mortgage lenders had put in place does not increase supply of properties to buy and it does not ease the concern that affordability has inflated prices way beyond trend.
I think mortgage lending is best left to people with some idea of the consequences of what Boris just did.
Perhaps he fancies himself as the George Clooney character in Perfect storm
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Surely any assistance that the Government can give to first time buyers should be welcomed by our sector?
Help to Buy is coming to an end and rather than create the impression that there’s nothing to follow Help to Buy, early indications of new schemes are very helpful indeed.
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I don’t disagree with that at all but I am asking what are the going to be able to buy? the market is already over extended. Low interest rates have increased the gap between the first home and the second, the second and the third all the way up the chain.
Creating a massive demand will inflate chain prices still further and lead to frustration.
I freely admit I do not understand the low interest rate policy as it robs economic policy of all attempts to control inflation. What I do know is what affordability does to prices.
If they can find a way of releasing 1 and 2 bed properties that are currently used as BTL or short let AirBNB the demand doesn’t push up through the chain.
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Inflation isn’t a problem and it’s at the lowest level for decades. Look back at the 70s for a comparison.
Buying and renting is always led by demand. I think Big B will maintain demand on the buying side and then announce a humongous house building plan. Similar to power, wind farms. Ie job creation. You’re right about supply and this will solve it, although it will take years.
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New build buyers in London have already enjoyed the “benefits” of buying with just 5% deposits and Gov’t backed deposits of 40%.
However many in new build flat developments are already sitting in negative equity trapped..Not only that the 5 year interest rate free holiday coming to an end on the 40% deposits too causing more trouble for many.
No such thing as a free lunch its a sausage the debt s just squeezed to the other end
What was even worse as the enhanced Help 2 Buy incentives were only available on new build many were plunged into negative equity as soon as they completed as it became secondhand
A 2 tier price market occurring in the same development
Akin to driving a new car out of the showroom and it’s instantly devalued
Creating more personal debt is not the way forward
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The way I see it the government face 4 key issues;
1) Home ownership is at its lowest level for 40 years. Home ownership historically = long term wealth. Think, what’s going to fund the care of an ageing population?
2) Rebuilding the economy and employment after COVID-19/Brexit. The impact of increased new build volumes does just that. It’s not just about the trades on sites, it’s the impact throughout the supply chain and in to the wider economy.
3) Reduce consumer and national debt. Well you can pay it back of course, but that policy hasn’t worked very well to date.. The answer is inflation. Bad news for anyone with saving, great news if you own an asset, and of course if you’re a government sat on a huge amount of debt
4) Sentiment, because that’s what drives the economy and keeps a government in power. So make the active voting age people happy and content to stay in power
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This is exactly my experience too…
People bought brand new flats with assistance. for the same price as houses.
It was not help to buy. But help developers rip off FTB’s.
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Ok – its is much better not to bother then –
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Well argued Robert! There are usually tears when government meddles with the natural economies of supply and demand.
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I am all for stimulating the FTB market, but does anyone remember when 95% + mortgages were common place? Then Norman Lamont hiked interest rates, taxes increased and house prices fell tipping many in to negative equity prompting this new wave of homeowners to drop off their keys back at their lenders nearest branch.
NRLA said ‘“If the Government really wants to support homeownership it should consider changes to the tax system to support and encourage landlords considering leaving the market to sell to first-time buyers.’
Maybe time to bring back MIRAS. (Mortgage Interest Relief at Source)
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Most outcode areas are now showing prices above their linear trend line average, that is why the lenders increased the deposit requirement to calm the demand and buffer themselves from a 10-15% fall in prices.
I’m not sure how Boris is going to make lenders lend against their better judgement but I guess I am about to either learn something new that defies all economic logic or this will be history repeating itself.
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Anyone who suggests landlords should be encouraged by taxation to leave the market is out of touch. This article isn’t about landlords. Boris needs to keep demand high to encourage house building.
The only way out of the housing crisis we’ve all been talking about for a decade (or longer??) is to embark on mass house building to create jobs and homes.
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Exactly, and you need to give the developers belief there’s a ready market to turn their land bank asset in to profit (that’ll be the 95% mortgage then) and you need to convince the first time buyers that they will NOT end up in negative equity (so hello to higher levels of inflation).
Not good news for everyone, but then again this is pretty much how the majority of Baby Boomers gained their wealth through the 70’s & 80’s.
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Great lets build on every bit of land never mid bees birds hedgehogs butterflies
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Around here. They have concreted over everything. Building is not the solution. Build and they will come. England not the UK, is already the most densely populated country in the EU.
No, we need to stop population growth. Everything else, get the Government out of the housing market, restrict foreginers buying as many Countries do and allow the market to find its own level. As it used to.
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Really not sure what to make of this.
Clearly, being able to get 95% mortgages again would give the housing market an enormous boost. The current mortgage deals – or lack thereof – are making it difficult for many would-be first time buyers to get onto the housing ladder.
But I have reservations – this will only work if lenders, whether backed by the government or not, will make these mortgages available to your average first time buyer, or whether the lenders will do their usual trick of making those mortgages impossibly hard to get, and using every excuse in the book to turn down a deal.
Plus, why stop at first time buyers? First time buyers can only get onto the property ladder if there are properties for them to buy, and if there is a lack of mortgage products for home sellers trading upwards, rendering them unable to make their next purchase, then they naturally won’t sell.
The sad truth is that a more complete overhaul is needed of both the lending and the conveyancing process.But at least this is a start.
I just hope it’s properly thought through and workable for everyone.
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‘I just hope it’s properly thought through and workable for everyone.’
This is Boris Johnson you are talking about. The only thing he thinks through is his…
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I’m sure Boris won’t be authoring this with his own pen, to be fair.
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Boris wont be around to suffer the consequences .The potential political nightmare of evictions due to non payment of loans
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This is what you might call Welcome Madness
Short termism I am afraid……
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