The Chancellor has reportedly scrapped plans for a 99% mortgage after resistance from the banking community, according to Government insiders.
This comes following January reports that the Chancellor was set to introduce 1% deposit, or 99% loan-to-value (LTV) mortgages as part of the upcoming Spring Budget – with a view to helping first-time buyers struggling with affordability onto the housing ladder.
Newspage asked brokers for their views, which can be found below.
Andrew Montlake, managing director at Coreco:
“There were always more questions than answers around this policy and the reality was that lenders would not have been able to make this work in the way the Government thought.
“Income multiple limits, affordability, capital adequacy rules, not to mention the real risk of negative equity could all easily have turned the policy into a damp squib that helped very few.
“If they had bothered to consult with the industry before promoting the idea, they would have understood this earlier.
“As a result, they have now left more prospective young buyers disappointed and a housing market bereft of any innovative policies that actually help increase the supply of property or first-time buyers to own one.
“Tax cuts alone will not turn around their fortunes and the Chancellor needs to be careful of a repeat of the shambles that we saw under Truss.”
Emma Jones, managing director at Whenthebanksaysno.co.uk:
“This scheme would never have ended well, with the risk of negative equity the major downside.
“We need something better from the Government that offers solid and well thought through support for those looking to get onto the property ladder, not a scheme that has the potential to hit homeowners hard a few years down the line.”
Ying Tan, CEO at Habito:
“The 99% mortgage was only ever a headline maker, and not fit for purpose. I am glad it has been stopped before it started.
“Homebuyers need and deserve a better thought-out scheme that is sustainable, affordable and lasts the distance.
“Back to the drawing board Chancellor, but do keep engaging with the mortgage industry.”
Simon Bridgland, broker and director at Release Freedom:
“We should be thankful for small mercies.
“If the idea is scrapped, it will be looked back at as a “what the hell were we thinking?” moment.
“Of course we need something to help boost the property market, but unless Jeremy Hunt can pull a rabbit out of the hat, we will be left with nothing to make a real difference.
“Is another stamp duty holiday on the cards? Let’s hope not. That will simply lead to artificially inflated prices.”
Rowan Frayling, managing director at J Finance:
“Near 100% mortgages turn out to be a bad idea.
“Next up in today’s news, the pope is catholic and bears do indeed defecate in the woods.
“Thankfully this ridiculous attempt to grab votes from the younger generation doesn’t sound like it will become a reality.”
Peter Stamford, mortgage expert at The Mortgage Uni:
“Whilst this will be disappointing news for a large number of potential first-time buyers, it is clearly the best outcome for the stability of the housing market in general.
“This idea would have likely seen an artificially inflated housing bubble, which, when it burst, could have trapped a lot of first-time buyers in negative equity.”
Graham Cox, founder at Self Employed Mortgage Hub:
“I’m not surprised the banks were against the introduction of 1% deposit mortgages. It’s a terrible idea.
“With major lenders warning house prices could fall this year, the risk of falling into negative equity and being repossessed would be enormous.
“That the Government were even floating the proposition shows how desperate they are.”
Riz Malik, founder and director at R3 Mortgages:
“As much as the UK property market needs stimulation, this was never the answer.
“Unfortunately, we have a Chancellor looking for a stay of execution who has run out of time and ideas.
“I was expecting big things from this Budget but I think we will all be disappointed like a child who gets clothes on their birthday.”
Matthew Jackson, director at Mint FS:
“I think most brokers would agree that the UK housing market requires invigorating, and generally I would welcome any news schemes that might achieve that.
“However, the proposed 99% mortgage scheme was impracticable and unworkable.
“I suspected at the time that is was merely “click bait” designed to paint a positive picture of the Government.
“Brokers across the country will breathe a sigh of relief this morning as they will not have to deal with prospective buyers who expect to buy a home with little to no income and who would be at risk of negative equity.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management:
“I am glad this idea was short-lived. It was a false ray of light for borrowers, and the current market is too volatile to guarantee that they wouldn’t slip into negative equity immediately.
“Disaster has been averted if true.”
Gary Bush, financial adviser at MortgageShop.com:
“As we wondered at the time of the announcement this dream scheme by the Government was just a soundbite to play to the general public with the general election looming, there wasn’t any real substance to be found in the release and the promised fine details weren’t subsequently provided.
“It’s no surprise that the lenders might not be doing cartwheels over this meddling they already have great products available to help first-time buyers, they might need a decent mortgage advice firm to navigate you safely through them but the lender product availability isn’t the problem.
“We are growing tired of responding that the Housing Minister needs to look again at the Shared Ownership scheme and bring the lease terms offered by the Housing Associations up to date/remove the draconian lending restrictions – to revitalise the property building agenda.”
Jack Tutton, director at SJ Mortgages:
“This is disappointing news for first-buyers as this seemed to attract a lot of attention.
“The government would have had to offer significant guarantees for lenders to enter the market at that loan to value, and the crash of 2008 will still be very much in their thoughts.
“Maybe lenders could look to particularly help single first-time buyers, who often struggle to keep up with ever escalating house prices.”
Harps Garcha, director at Brooklyns Financial:
“The decision to scrap the 99% mortgage scheme may leave many first-time buyers feeling disheartened, but the reasons behind the move are hardly surprising.
“Affordability challenges for banks, particularly in pricey regions like the South East, coupled with the risk of negative equity for new buyers, made the short-term appeal of such a stimulus difficult to justify.
“While the housing market undoubtedly needs a boost, this scheme could have backfired spectacularly.
“Instead, policymakers should focus on wider and longer term solutions that tackle underlying issues like housing affordability and supply shortages.”
Richard Jennings CeMAP, founder and managing director at Richard Jennings Mortgage Services:
“Thankfully the lenders and banks have persuaded the Government to bench this idea. 99% mortgages were never the answer, more a vote winner from a younger demographic.
“This is what happens when Government policies are designed to win votes rather than genuinely support the people of this country.
“A potential 2008 has thankfully been diverted.. It’s now time to stop coming up with voted-grabbing schemes and actually deliver on the one thing we really need, namely to build some more houses, and at pace.”
Michelle Lawson, director at Lawson Financial:
“Near disaster has been averted if this is truly the case. This was a hare-brained idea from day one and could have put many borrowers at real risk of negative equity.
“The banks seem to have learned from the Global Financial Crisis, even if the Government had not.”
