The Prime Minister has promised to help young homebuyers, and transform generation rent into generation buy with 95 per cent mortgages. Here is everything that we know so far about Mr Johnson’s proposed scheme.
Boris Johnson made the announcement at the virtual Tory Party conference this week. In the wake of the pandemic with low deposit mortgages disappearing faster than the latest Aldi specialbuy, it sounded almost too good to be true.
‘We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 per cent of the value of the home – vastly reducing the size of the deposit,’ said the PM.
‘We believe that this policy could create two million more owner-occupiers – the biggest expansion of home ownership since the 1980s. We will help turn generation rent into generation buy.’
What is the generation buy scheme?
Boris Johnson offered little further information on how this scheme would work or when it would be introduced. It is a tricky promise to deliver with many lenders withdrawing their small deposit mortgages in the wake of the pandemic.
The government might need to act as a guarantor to help make the 95 per cent deposits a reality. However, that still doesn’t solve the issue of how lenders will assess how affordable monthly repayments are. Though Johnson has hinted that the government may look at ways for these stress tests to be removed.
The housing industry, however, is sceptical about the PM’s ability to deliver on his promise of two million more homeowners.
‘The affordability of homeownership is a problem at present and providing buyers with a foot up via a smaller deposit will help many to overcome this hurdle,’ comments Marc von Grundherr, Director at Benham and Reeves.
‘In the more inflated markets such as London, it reduces the deposit required by some £25,000 and so the initial saving is notable.’
James Forrester, Managing Director of Barrows and Forrester, comments: ‘The cause of the dire situation we find ourselves in is the Government’s sustained failure to build enough affordable housing year in, year out.’
‘The inadequate supply of housing to meet demand is one of the driving factors that has caused house prices to spiral.’
Current help to buy schemes
The government currently already offers several schemes to help first-time buyers onto the property ladder. The Help to Buy equity loan and First Homes scheme supports first-time buyers purchasing a new build home.
The Lifetime ISA is also available to those under 40 saving for a deposit. The government tops up £4,000 savings a year with £1,000. Many buyers are also able to take advantage of the stamp duty holiday for homes costing up to £500,000, available until 31 March next year.