Prime Minister Boris Johnson and his Conservative government have announced a plan to introduce a new scheme which will enable first-time buyers to gain a mortgage with just a 5% deposit.
Speaking at the virtual Tory conference this week, Johnson explained that large deposits were crippling the efforts of many young people who want to become property owners. By providing 95% mortgages, he hopes to create two million new homeowners and turn ‘Generation Rent’ into ‘Generation Buy’. He argues that, while most people can easily afford monthly mortgage repayments, it’s the large lump-sum deposits which are thwarting opportunities.
“We need now to take forward one of the key proposals of our manifesto of 2019,” Johnson said, ”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.
“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.”
Who’s going to pay?
While this announcement sounds great for budding homeowners, details as to how exactly it will be done and how much it will cost the taxpayer remain very thin. With the government pledging to underwrite the 95% mortgages which private lenders refuse to do, public money is going to have to be found from somewhere.
In already expensive times for the government – Covid measures, job protection schemes, stamp duty holiday, etc – many commentators are cautious about celebrating this announcement.
If it comes to fruition, many young people will, for the first time, have a great chance of getting on the ladder, but we’ll need to hear more specific details from the government before getting too excited about this news.