Thinktank Corroborates And Costs Boris Johnson's SDLT Changes

2m more homeowners thanks to PMs pledge

At the Conservative Party’s national conference, Prime Minster Boris Johnson revealed that he will bring forward proposals to introduce a fixed-rate long-term 95% LTV mortgages to enable first time buyers (FTBs) to get onto the property ladder.

Getting more FTBs onto the property ladder was part of Mr Johnson’s 2019 manifesto promises when he ran for the position of Prime Minister.

Addressing his fellow Conservative’s at the conference, Mr Johnson said:

“For most people it is still true that the overwhelming instinct is to buy.

“But for many of them they simply can’t, not because they can’t afford the mortgage but because they can’t afford the deposit.

“The disgraceful truth is that home ownership levels in this country have plummeted and that many are forced to pay through the nose to rent a home they can’t truly love or make their own.

“This policy will create two million more owner occupiers – the biggest expansion since the 1980s of home ownership, to every part of the country.”

These words will be music to the ears of FTBs who since the coronavirus pandemic have seen financial institutions withdrawing their 95% LTV products as they attempt to ensure they’re not lending money which ultimately may not be paid back due to the pandemic.

Naturally, the industry has responded to the PM’s rally cry, with some hailing this as a great move. However, not everyone is convinced.

David Alexander, joint managing director of leading property management company apropos, said:

“The proposal by the Prime Minister to offer a 5% deposit mortgage scheme for first time buyers to “fix our broken housing market” sounds superficially appealing but ultimately does not bear much scrutiny. Offering mortgages to individuals which lenders already regard as high risk has the potential to land people with future negative equity. No-one would doubt that the intention is well meant but the execution could result in many individuals acquiring unwanted and unsustainable debt in the years to come.”

“Following the financial crash of 2008 additional stress tests and financial limits for mortgage approvals were introduced precisely to avoid another boom and bust in the housing market. This policy would appear to reverse this precautionary approach and introduce high value mortgages with little equity to support them. Even a slight dip in the market could result in negative values for many thrusting them into a difficult financial position.”

“The impact on the private rented sector (PRS) could be significant if this policy is implemented. If more people shift from the PRS toward owner-occupier, then demand may slip but the reality is that the UK population – prior to the pandemic – was forecast to increase by almost 300,000 people per year for the coming years. The result is that demand in the PRS will remain strong regardless of this kind of intervention by Government. The real concern, however, is that this is a populist position which could threaten the stability of the UK housing market if there is a future dip in prices.

Mark Hayward, Chief Executive, NAEA Propertymark comments:

“We welcome the Prime Minister’s comments today which shows a positive change in tone by promoting a generation of renters to become a generation of buyers. We encourage lenders to come on board and support this initiative to enable first time buyers to enter the property market by future proofing the financial burden many face.”

“We want to see intent become action quickly so that first time buyers can make the most of the current stamp duty holiday and continue to stimulate the housing market.”

Rob Houghton, CEO from reallymoving, said:

“We support the Government’s efforts to reduce barriers for first time buyers and welcome the return of 95% mortgages with caution.

“High loan to value mortgages do come with risks, but there is a place for them in today’s market as long as first time buyers are educated and informed about what could happen if prices fall.”

Marc von Grundherr, Director at Benham and Reeves said:

“Creating two million more homeowners is a lovely bit of rhetoric for Boris to fuel market sentiment, but it comes with a clear and obvious problem. Where are they going to live?

“Yes, the affordability of homeownership is a problem at present and providing buyers with a foot up via a smaller deposit will help many to overcome this hurdle. In the more inflated markets such as London, it reduces the deposit required by some £25,000 and so the initial saving is notable.

“However, we’re simply not building enough homes and the Government’s head in the sand approach to this burning issue is going to bring about problems when those securing these new mortgages actually look for a home.”

Ian McKenzie, Guild of Property Professionals, commented:

“Is what Boris proposing a good idea for the market? One could argue that it is a very good idea based on the fact that the UK is teetering on the brink a substantial recession, possibly as bad as the 1930s, and any stimulus that promotes growth and income generation for the wider economy has to be positive.”

The PM’s pledge has disgruntled landlords and the rental sector, who have taken to heart the fact that he said tenants are unable to make their rental houses their homes.

This has resulted in the National Residential Landlords Association (NRLA) demonstrating that this simply isn’t the case.

A survey they conducted found that 63% of renters had re-decorated their home and over half (52%) had made significant changes to their gardens with the permission of their landlords.

Chris Norris, NRLA policy director, says:

“Whilst we believe that those who want to should have the opportunity to buy a home of their own, the Prime Minister is wrong to imply that renters cannot turn the properties they live in into a home of their own.

“Indeed, landlords much prefer to have tenants settled long term in a home they feel comfortable in and want to look after.

“If the government really wants to support homeownership it should consider changes to the tax system to support and encourage landlords considering leaving the market to sell to first time buyers.

“Reports that ministers are considering an increase in Capital Gains Tax would serve only to incentivise landlords to hold on to properties longer than they might otherwise have done.”

One Response

  1. IS ANOTHER MASS_SCALE TAXPAYER FUNDED LEASEHOLD SWINDLE IN THE MAKING?
    WILL THIS BE TRUE HOME OWNERSHIP? .or 95% MORTGAGES ON LEASEHOLDS i-e TENANCIES??
    PEOPLE ARR SICK and TIRED OF PAYING MORTGAGES on TENANCIES
    LEASEHOLDS and “SHARED OWNERSHIP” FLATS ARE GLORIFIED TENANCIES with STRINGS ATTACHED.
    STEER CLEAR of ANYTHING LEASEHOLD.

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