Boris Johnson’s 95% deposit mortgage proposal raises much criticism
Experts think the proposal will bring more problems than solutions.
Boris Johnson’s proposal to introduce a 5% deposit mortgage scheme where the standard rules of stress testing do not apply could result in people taking on unsustainable debt.
That was the opinion of David Alexander, deputy managing director of Apropos, the property management company.
Alexander said: “The Prime Minister’s proposal to offer a 5% deposit mortgage scheme to first-time buyers to ‘fix our broken housing market’ sounds attractive, but doesn’t stand up to much scrutiny.”
“Offering mortgages to people already considered high risk by lenders has the potential to attract people with negative future net worth.”
“No one would doubt that the intention is well-intentioned, but the execution could result in many people taking on unwanted and unsustainable debt for years to come.”
He added: “Following the 2008 financial crisis, additional stress tests and financial limits were introduced for mortgage approval precisely to prevent another boom and bust in the housing market.”
“This policy would appear to reverse this precautionary approach and introduce high-value, low-equity mortgages to back them up.”
“Even a slight drop in the market could result in negative values for many, pushing them into a difficult financial position.”
“This scheme will help first-time buyers a lot.”
Some were more positive about the potential scheme.
Mark Hayward, CEO of NAEA Propertymark, said: “We welcome comments from the Prime Minister today that show a positive change of tone in promoting a generation of renters to become a generation of buyers.”
“We encourage lenders to join and support this initiative to enable first-time buyers to enter the real estate market by preparing for the financial burden many faces.”
“We want the intent to quickly translate into action so that first-time buyers can make the most of the current stamp duty holiday and continue to stimulate the housing market.”
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