Boris Johnson : Generation Buy
This week at a virtual Tory party conference, Boris Johnson said “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% of the value of the home – vastly reducing the size of the deposit”
He has pledged to transform “generation rent” into “generation buy”
Well, what does this mean ?
Back in December 2016 the Help To Buy Guarantee scheme had just ended. This was a scheme that allowed someone to put down a 5% deposit to buy a home. To allay the fears of the lender and increase their lending appetite, the government would “guarantee” another 15% of the property value. This meant that should the mortgage not be paid, the home get repossessed and sold undervalue, the likelihood of the lender ending up in negative equity or out of pocket would be greatly reduced.
Not all lenders signed up for this scheme, only a modest number. But if you were a first time buyer or next time buyer with no background properties, it was a handy way to buy a house with little savings and strain on parents. The interest rates may have been higher than they are today, but the houses prices were most likely (depending on where you lived) lower 4 years ago.
Mr Johnson’s comments would suggest something similar to that scheme is on the government’s agenda. Currently it is difficult to purchase a home with a 10% deposit and 15% deposit mortgages are becoming increasingly expensive. With no immediate signs of the Covid pandemic relenting and the Stamp Duty relief ending in 5 months’ time - the housing market is facing an Uncertain Time™. This type of scheme could help, as it did before but i would expect limited access, tough credit scoring and higher rates. It would probably only be a short term fix, with house prices increasing, furlough ending (in the main) and employment on the rise, is more has be done to assist people attaining home ownership.
Overall, First time buyers are in need of help and this is good news for them. Hopefully, we will have more details soon