During the virtual Conservative party conference that took place on 6 October, Prime Minister Boris Johnson announced a radical new scheme to help first-time buyers get on the property ladder.
In a bid to turn “Generation Rent” into “Generation Buy,” the government’s plan for a 95% mortgage scheme aims to create an estimated two million new homeowners across the UK.
Although details of the new initiative are yet to be announced, hope has been restored to many renters who have previously been unable to join the property market.
Johnson acknowledged that many young people feel excluded from the joy of property ownership, not because they cannot afford the mortgage repayments but because they are unable to secure the deposit.
On average, it can take up to a decade to save for a deposit to buy a property, with an average of 15% of the property value being required.
For many young people, this is unrealistic and they subsequently view renting as their only option. The number of renters under the age of 40 has risen in recent years, with many feeling that homeownership will not be possible for them in the current climate.
Covid-19
As a result of the pandemic, the majority of 5% deposit mortgage deals have disappeared from the market. Lenders were concerned about potential losses that would be incurred from a fall in house prices and withdrew many of their low-deposit deals to reduce risk.
This left many homebuyers feeling disappointed and discouraged during the lockdown, where pressures were already high.
The return of 5% deposit mortgage deals has been welcomed by many, however it has not come without uncertainty. As we wait for further information from the government, speculation in the property industry has seen several possibilities brought into the discussion.
Affordability tests
One suggestion that has been well received is to relax the stringent affordability assessments, which have caused difficulty for many hopeful homeowners in the past.
It remains unclear how many new deals will be brought to market because of the scheme, but news of the return of 5% deposit mortgage deals has given confidence back to many aspiring homeowners.
For many renters who felt they were unable to realise their dream of owning their own home, the Prime Minister’s pledge to fix our “broken housing market” has given them new hope that one day it will become a reality.
At Home Legal Direct, we work with every mortgage lender in the UK and are ready to help you with your journey. Get your online conveyancing quote today here.
Peter Joseph is CEO of Home Legal Direct
