Last week Boris Johnson stated that his government would “turn generation rent into generation buy” by bringing back 95% mortgages for first-time buyers. In recent months low-deposit mortgages have virtually disappeared across the UK. This is due to some lenders being fearful that house price falls could leave them exposed to big losses. Major lenders such as HSBC and Santander have mostly withdrawn from offering 90% and 95% mortgage loans. This has left first-time buyers struggling to qualify for a loan without putting down a 15% deposit.
In his conference speech, Johnson said “We need to fix our broken housing market.” He promised that buyers would be given “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”. Easily available low-deposit mortgages “could create 2 million more owner occupiers, the biggest expansion of home ownership since the 1980s”. He added “we need mortgages that will help people really get on the housing ladder even if they have only a very small amount to pay by way of deposit, the 95 per cent mortgages. “I think it could be absolutely revolutionary, particularly for young people.”
It is no secret that levels of U.K. home ownership have been slipping in recent years. According to a report earlier this year from the U.K.’s Office of National Statistics, those between the ages of 35 and 44 are now three times more likely to be in private rented accommodation than they were two decades ago. With only 50% of people in this age group having a mortgage today, compared to 68% in 1997. Those between 24 and 34 are also twice as likely to be renters now as they were then.
However, Johnson’s plan is sounding alarm bells among some banks and housing charities. Some worry it represents a return to dangerous lending practices that U.K. regulators have been trying to stamp out since the 2008 financial crisis.
95% mortgages for first-time buyers are an appealing prospect for those trying to get onto the property ladder. If this scheme enables you to purchase your first home, it is important that you have a survey done. Researched has shown that properties that have not had a survey will face an average of £5,750 in repair bills due to hidden defects. Here at Avery & Co we have a dedicated team of RICS Chartered Surveyors with many years’ experience and local knowledge who adhere to the RICS framework for professional industry standards.
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