MORTGAGE products are set to to be upended as Boris Johnson unveiled plans to launch five percent deposit offerings. The Prime Minister announced he intends to get new buyers onto the property ladder but some have criticised the feasibility of his plans.
Mortgage deals can be focused around how much a person has managed to save as a deposit. Generating a large enough deposit to lower the cost of a mortgage can be difficult to do in the current environment, given the costs of property in the UK.
As the Prime Minister confirmed in a recent speech: “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 percent of the value of the home - vastly reducing the size of the deposit.
“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.”
While the announcement was likely welcomed by many savers with aspirations to get on the housing ladder, the plans also faced a fair amount of criticism on the announcement.
One key dilemma identified is that this plan will be funded with public money, something the existing government is already struggling with as coronavirus support costs rise.
Mary-Anne Bowring, the group managing director at Ringley and creator of PlanetRent, also expressed frustration with the concept of prioritising mortgages at all: “The government’s disparaging talk about turning Generation Rent into Generation Buy ignores the fact that more people are renting and for longer, often as a lifestyle choice, and in today’s footloose society having a mortgage can be as much a burden as a bonus.
“If the government was genuinely serious about fixing the housing crisis, rather than focusing on demand-side subsidies it would focus on boosting supply across the board, with a mix of tenures.
“At a time when banks are pulling higher loan-to-income mortgages due to the profound economic uncertainty that coronavirus has caused, for the government risks looking massively irresponsible by calling for their reintroduction and suggesting taxpayers’ money could be used to underwrite them.”
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