Boris Johnson announces comprehensive review of the mortgage market

In his speech today, the Prime Minister set out the government’s commitment to reversing declining homeownership rates.

This comes after the proportion of 25- to 34-year-olds who own their own homes has fallen from 55% to 34% between 1996 and 2016.

Johnson also confirmed his ambition to “unlock the opportunity of home ownership” for more people through Right to Buy.

The Prime Minister also committed to helping those in a position to buy, to access the mortgage finance they need, ensuring people are incentivised to save for a deposit no matter their financial situation, and improving the supply of housing across the country.

In his speech, Johnson said: “The global rise in the cost of living is only making life harder for savers. So we want it to be easier to get a mortgage.”

“So today I can announce a comprehensive of the mortgage . 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 kinds of alternative ways of offering finance, managing risk, and unbolting the door to ownership.”

“I want us to deliver on the long-standing commitment, made by several governments, to extend the right to buy to housing associations.”

“Over the coming months, we will work with the sector to bring forward a new Right to Buy scheme. It will work for tenants, giving millions more the chance to own their 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 property sold.”

“Even as we deliver this home ownership revolution, we will continue with our revolution in renters’ rights,” Johnson added. 

In an interview discussing the new policy with TalkTV, MP and Levelling up and housing secretary Michael Gove said: “The first thing is we’re reviewing the mortgage overall in order to make sure that the appropriate approach towards loan-to-value (LTV) ratios are taken by lenders.”

“Looking at the barriers that currently exist for first-time buyers and getting a deposit together. The second thing is that we’re also looking to see how we can use some of the existing saving vehicles that we have to ensure that people can specifically save more to qualify for a deposit and have those disregarded when it comes to benefit claims. T.’s a particular change that we’re hoping to introduce t..”

However, when asked how many people the policy would affect, Gove said: “In this country, t. are more than three million people moving to claim housing benefit and significant numbers of them also getting support for their rent through Universal Credit.”

“I don’t know, and nobody can know precisely how many people will individually choose to take advantage of a policy,” Gove added.

According to a BBC article, housing benefits, which help low-income or unemployed people pay their rent, cost the government around £30bn a year, a large proportion of which goes to private landlords. 

Tony Blair Institute chief economist Ian Mulheirn says: “The latest effort to breathe life into Right to Buy might appeal to Tory nostalgists, but it’s a bad idea in principle and an even worse one in practice.”

“If it works it risks further eroding the much needed social housing stock. But in practice, it’s unclear w. the money will come from to compensate housing associations anyway so it won’t move the needle on home ownership.”

“Far more important is the suggestion that the government plans to the mortgage market. Overhauling mortgage finance to give people on moderate incomes access to mortgage insurance and long-term fixed rate loans would address a major intergenerational unfairness in the housing market. This could return home ownership to levels seen in the mid-2000s, putting up to 1.4m people back on the property ladder,” Mulheirn adds. 

Last month it was revealed that the UK government was set to provide households in England who rent properties from housing associations the opportunity to purchase them at a discounted price.

The proposal intends to give the 2.5m households in England who rent properties from housing associations the power to purchase their homes at a discounted price.

They were said to be inspired by Margaret Thatcher’s scheme, which was launched in 1980 to allow families to buy homes from councils.

Money.co.uk personal finance expert James Andrews says: “The devil will ultimately be in the detail”.

Johnson is unashamedly dipping into Margaret Thatcher’s ‘Greatest Hits’ catalogue to shore up backbench support following this week’s damaging no-confidence vote.”

“Mrs Thatcher’s right to buy scheme allowed millions of council tenants to buy their homes at a discount, but 40 years after it came into effect, home ownership has actually fallen back to 1980s levels.”

“Many of these homes now seem to be in the hands of private landlords, with the rise in people renting privately almost exactly mirroring the fall in people renting socially since the 1980s.”

Andrews suggests that concerns also remain whether homes passed to social renters under the scheme will be replaced.

“That’s all before we get to questions on lending practices – with income multiples and deposit requirements from mortgage lenders seemingly at odds with benefits policies, that cap payout and progressively remove benefits the more you have saved up in the bank.”

“Until the finer details are ironed out with input from stakeholders across the housing sector, including major lenders, many question marks will remain over whether the Prime Minister’s ambitious plans will ever amount to anything more than headlines for Britain’s millions of aspiring homeowners,” Andrews comments. 

Also reacting to Johnson’s latest plans, Shaw Financial Services founder Lewis Shaw says: “It’s more bluster from the blond blancmange. Just resign for God’s sake and let someone with an ounce of competence and integrity have a crack.”

“Mortgage lenders already allow people to use state benefits to support a mortgage and have done for years. It varies from lender to lender exactly which state benefits they’ll take into account, so I’m not sure what a new policy could be. It’s almost as though they don’t know how the mortgage market works already.”

“If we’re to believe they want higher LTV mortgages, t.’s only one place to go, and that is 100% LTV. However, again, we already have 100% LTV as a couple of lenders allow you to take a personal loan as a deposit.”

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