Prime Minister Boris Johnson has announced a review of mortgage market with the aim of increasing the supply of low deposit mortgages.
In a speech in Blackpool covering the housing market at the economy, the Prime Minister said he ‘wants to make it easier to get mortgage’.
He said many people could afford to pay a mortgage but are held back as they cannot save a big enough deposit to make it onto the housing ladder.
He confirmed there will be a mortgage review, reporting this autumn, to look at how people can be offered more low deposit mortgages.
He said: “We want it to be easier to get a mortgage. Working with lenders so that they recognise the credit worthiness of tenants with a track record of paying their rent on time. Making sure that the self-employed also get the mortgages they need.
“This Government has made sure that there is a healthy supply of 95% mortgages. Tens of thousands of first-time buyers have since bought their home thanks to our mortgage guarantee scheme “But we’d like to go further.
“So today I can announce a comprehensive review of the mortgage market.
“Reporting back this Autumn it will look at how we can give our nation of aspiring homeowners better access to low-deposit mortgages, and what our own mortgage industry can learn from counterparts around the world who have all kind of alternative ways of offering finance, managing risk, and unbolting the door to ownership.”
He also discussed plans that will see those on benefits able to save through a lifetime ISA or a help to buy ISA without seeing their benefit payments cut.
Under the current system when those savings hit a certain level benefits end up being withdrawn.
An extension to the Right to Buy has also been announced and the policy will now be expanded to include housing association tenants.
The PM said “it is time for change” and vowed to start a “home ownership revolution”.
He added: “It will work for tenants, giving millions more the chance to own their own home, it will work for taxpayers, responsibly capped at a level that is fully paid for, affordable within our existing spending plans and with one-for-one replacement of each social housing policy sold.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “In theory, I understand the logic behind trying to reduce the benefits bill.
“But this is predicated on house prices continuing to rise fairly rapidly, which is no comfort for those not on the ladder who are aspiring to get on there at some point in the near future.
“The other point is that it relies on lenders taking on borrowers who are on benefits, as they are often the ones who are struggling not just with raising deposits but making repayments.
“They are often on lower salaries and struggling to make ends meet, so would lenders take them on from a commercial point of view without some sort of guarantee from the government that they will meet their repayments?
“I think this is bluff and bluster; as is often the case, what we need is a lot more detail.
“There has been mention of replacing housing association properties that are lost but we want to see more details as to where they will be, what type of property and will it be one-for-one?
“There also needs to be a commitment to longer-term rentals which are never going to be sold as those with families and young children should have a guarantee that they have a place for life, providing longer-term security.
“Politically people say to us the two things that matter about voting are jobs and homes. If they have trouble finding or keeping either, the government tends to get the blame rather than the employer or the lender. Clearly, homes need to be a priority for the Government.”
Karen Noye, mortgage expert at Quilter, added: “In Blackpool today, Boris Johnson tried to persuade the public to move on from the ‘partygate’ scandal by announcing a slew of new housing measures.
“One of those announcements was a review into the mortgage market, which will report in the autumn.
“However, the details of what this actually means is yet to be seen. By his own admission, there are a healthy supply of high loan to value mortgages available so what this review will uncover is anyone’s guess.
“The crux of the matter is that it is not the mortgage industry that needs fixing but the housing market and its sky high prices. Part of the reason why house prices are soaring is because there are so few properties out there.
“Build more stock and the scramble for properties, which is pushing prices ever higher will come to a halt. This would in turn help generation rent whose dreams of owning a house are unfortunately just a dream at present.
“A few weeks ago, Secretary of State for Levelling Up, Housing and Communities, Michael Gove, gave some clues about what might be tabled come autumn in a bid to help first time buyers.
“One of the potential solutions was the introduction of a Canada-style insurance policy against defaulting in order to get lower mortgage rates which would help boost home ownership among those with small deposits.
“We have seen time and again government housing schemes falling very far from the mark even if well-meaning. A good example is Help to Buy, which has for some been disastrous and contributed to lining the pockets of housebuilders while not actually helping as many people as hoped.
“Ultimately we just need to build new homes in areas that people actually want to live rather than soulless out of town developments. Doing this would be far more powerful than tinkering around with ways to help people finance their first home.
“Although this point does need to be addressed the problems young people and renters face across the nation are akin to Frankenstein’s monster with every housing policy or proposal ultimately making the beast harder to tame.
“A good example of this is the stamp duty holiday which did very little to help first time buyers bar putting house prices even further out of reach.
“The only tried and tested way of helping people buy their first home is by sticking to the laws of supply and demand. Simply put if you build more desirable houses, prices come down and people have a fighting chance of getting on the housing ladder.
“Johnson may be in luck though and prices will come down regardless. The nation faces a dire financial picture with rising inflation and interest rates rising as a result. All this could ultimately cause house prices to slump on their own.”
Further reaction
Lewis Shaw, founder of Mansfield-based Shaw Financial Services:
“This is the ultimate political meringue: sweet, lightweight and with very little substance. Homeownership levels are lower now than they were in 2010, and we know that vast swathes of right to buy houses have ended up in the hands of private landlords.
“We don’t need more right to buy schemes, we need to get more homes built and to bring down the cost of buying and owning a home. Talk about fiddling while Rome burns.”
Sabrina Hall of Lichfield-based Kind Financial Services:
“As is often the case with these announcements, the devil is in the detail but as it stands I can’t work out how this would possibly work.
It’s simply a huge distraction from #partygate. Most people or families that rely on housing benefits don’t have much, if any, disposable income, so what happens if they purchase their own home and suddenly they need a new boiler, a roof repair or a replacement kitchen?
“Will the Government increase their benefits to cover the costs of maintaining their home? Is this about giving people financial security or cutting costs? A mortgage also requires additional costs such as buildings insurance.
“Also, while it’s not required, I would suggest that it wouldn’t be recommended to take a mortgage without life cover if it’s a joint mortgage so as not to leave a remaining party trying to repay the entire mortgage on a single income in the event of a death.
“Again, is the Government going to factor all this into the benefits in order to encourgage homeownership? If a person’s circumstances change, will the Government look to improve the support package that they have for homeowners to reflect the fact that they have encouraged people to take out mortgages on these properties?
“Currently, you would only get support paying the interest on your mortgage and only by way of a loan, which is repaid if you sell the property.”
Oli Pearce, director at Wellingborough-based Guild Mortgage Services:
“The whole policy package seems like political waffle to me. Last time I checked, lenders dictate what income they will allow for a mortgage application. The real issue here, which isn’t being addressed, is the lack of homes being built and availability of stock. That is the problem with the property market.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com:
“This is a policy put together at breakneck speed to get Boris Johnson back on his feet after a turbulent week. The mortgage market is in good health and many in the industry will be scratching their heads at the idea of a comprehensive review.
“If it ain’t broke, don’t fix it. As noble as these intentions around home ownership are, whether they will ever come to fruition is another thing entirely. In the property market, bureaucracy and red tape have a habit of getting in the way.
“Homeownership is an emotional issue and on Thursday we saw Boris Johnson trying to reconnect with the public, many of whom have lost faith in him and his Government. This felt like a General Election speech, not a speech on a grey day in Blackpool in June.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:
“The benefits proposal is a bit leftfield and I’m not sure lenders will like it. Using benefits, especially housing benefits or Universal Credit, is not ideal to base a mortgage on and even if it is used it is unlikely to boost borrowing eligibility enough to make a big difference.
“As far as the new right to buy scheme is concerned, this may help some but it is a bold claim that every house sold will be replaced by another to ensure social housing does not reduce further.
“Given the fact that the Government have failed to get close to any housebuilding targets, this seems a big ask. As ever, the devil is in the detail, and the Government has a record of announcing so-called market changing initiatives only for it to achieve very little.
Why a review of the mortgage market is needed to see if deposits can be reduced borders on farcical. Borrowers can get loans with a 5% deposit already and reducing that further just means that more are at risk of negative equity if things go wrong.
“All of these schemes seem to be demand-sided, which keeps the prices of properties high without addressing the real supply side issues.
“The Government would be better off to nationalise a housebuilder and build their own affordable housing in places people want to buy or create new places complete with infrastructure that make it appealing.”
Doug Miller, director at Bath-based independent mortgage broker, Lansdown Financial Services:
“Boris, yet again, has failed to address the fundamental issue of the current housing market. Until the crisis around the shortage of houses is solved, the ever-increasing demand for property will continue to see house prices soar.
“Those that predicted that rising interest rates, out of control inflation and the rise in living costs would immediately translate into a housing market crash have been proved wrong.
“Over the past few months our level of mortgage enquiries demonstrates that demand remains as strong as ever, with many people needing to offer well over the asking price for properties in many areas of the UK.
“Until this supply shortage is addressed, the measures announced Thursday will simply exacerbate the situation we are currently in, not to mention that is highly likely mortgage lenders will struggle to adjust their criteria and adapt to these new rules.”
Marcus Wright, MD of Bolton Business Finance:
“Boris is trying to shake the #partygate hangover with a housing party for 2022. The “benefits into bricks” slogan is certainly a catchy one and is likely to go down very well with working class voters. Homeownership is still the dream for a large number of renters in the UK.
“Also it doesn’t look like the housing market will be slowing down any time soon, if new measures are introduced to make it easier to get a mortgage.”
Fanny Snaith, a Cheltenham-based certified money coach:
““Whether Thursday’s speech will be a vote winner only time will tell. For now, all we know is that the price of property will have to be lowered considerably for renters to be able to afford to buy given the size of deposits required. Buying high and selling low is just one risk.
“More broadly, I can’t see how the figures will stack up. Again, a lot of Boris nonsense.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“We welcome any change from the Government that will help get more people in a position to be able to become homeowners.
“As the Prime Minister has said, prospective first-time buyers have been aiming at a moving target with rising housing prices, interest rate hikes and the cost-of-living crisis taking its toll on their ability to be able to get a foot on the property ladder.
“Many are already paying rent that would equal their mortgage repayments, however, many have been hindered by deposit requirements and meeting mortgage approval criteria.
“Wider access to low-cost, low deposit finance options will help pave the way for more buyers to purchase their first home.”
