The government is considering a ‘Generation Buy’ scheme aimed at helping first time buyers onto the housing ladder. The prime minister is keen that long-term fixed-rate mortgages are offered to those with just a 5 per cent deposit to put down, after lenders largely pulled out of this market on the back of fears as to the risk involved in lending at high loan-to-values during the pandemic.
Ahead of the Conservative party conference, prime minister Boris Johnson told The Daily Telegraph. We need mortgages that will help people get on the housing ladder. Even if they have only a small amount to pay by way of deposit. It could be absolutely revolutionary for young people.
Were such mortgages to be introduced, the government may end up taking on some of the risk in the form of a state guarantee. Lenders have tended to avoid riskier mortgages over the past few months. Because of the impact of Covid-19 and a potential recession; this has resulted in few 90 per cent LTV deals available. And those lenders which are brave enough to offer them being swamped with applications. According to Money facts, there were 391 95 per cent mortgage deals in March; by September, this had dropped to just 12.
The problem with such a scheme is that potentially it will push property prices higher still, making it even harder for first-time buyers to get on the ladder. Nationwide building society reported last month that prices are already at an all-time high on the back of the stamp duty holiday. And low mortgage rates – in trying to help, the government could end up making matters worse.
A whole-of-market broker such as AWS Financial Services can help first-time buyers find the right mortgage for their circumstances. Please get in touch for more information.
