The mortgage industry has expressed reservations at Boris Johnson's plans to encourage more long-term fixed-rate mortgages for buyers with 5 per cent deposits.
In his party conference speech today (October 6) the Prime Minister said the Conservatives would help turn “generation rent” into “generation buy” with its policy on long-term fixed-rate mortgages.
Mr Johnson said: “We need now to take forward one of the key proposals of our manifesto of 2019 – giving young first time buyers the chance to take out a long-term fixed rate mortgage of up to 95 per cent of the value of the home, vastly reducing the size of the deposit, and giving the chance of home ownership – and all the joy and pride that goes with it – to millions that feel excluded.
“We believe that this policy could create 2m more owner occupiers, the biggest expansion of home ownership since the 1980s.”
It comes after an interview with TheTelegraph published on Friday (October 2), in which Mr Johnson also referenced the plans.
He did not divulge any further details at this stage but in its manifesto the party pledged to "encourage a new market in long-term fixed rate mortgages which slash the cost of deposits, opening up a secure path to home ownership for first-time buyers in all parts of the United Kingdom".
It also detailed a First Homes policy, which promises a 30 per cent discount for first-time buyers who, according to the government, will save around £100,000 on the price of an average new-build property in England.
Mark Harris, chief executive of SPF Private Clients, said the prime minister’s plans for 95 per cent home loans had created “quite a bit of noise” when they were first mentioned last week.
Mr Harris added: “When you consider that there is some nervousness among lenders regarding lending at 90 per cent LTV, it will be interesting to see if anything comes of this scheme and how it will be structured.”
Likewise Dominik Lipnicki, director at Your Mortgage Decisions, said he feared the ‘Generation Buy’ scheme could “just be a headline-grabbing initiative” but agreed there was a “real need” to help people onto the housing ladder.
Mr Lipnicki said: “We have already had access to high loan to value products prior to the pandemic and yet for many, owning a home was then a pipe dream.”
Lenders have recently been coming in and out of the high LTV market after withdrawing products amid high demand after the lockdown period.
Charles Morley, director of mortgage distribution at Metro Bank, said any initiative to potentially support first-time buyers should be “welcomed, but with a note of caution”.
Mr Morley said: “The scheme must take into consideration the precise needs of the marketplace and not try to dictate its outcome. Long term fixed rates, in excess of five years, are unlikely to succeed due to current demand and potential underlying cost.