Prime minister Boris Johnson is to set out plans to boost home ownership in England which will see low earners allowed to use housing benefits to cover mortgage payments.
In a speech in Lancashire today (June 9), where the prime minister will set out his vision to tackle the rising cost of living, Johnson is also expected to confirm plans to extend the right-to-buy scheme to housing association tenants.
According to extracts released by the prime minister’s office earlier today, the government is committed to reverse declining home ownership rates, which has seen the proportion of 25 to 34 year-olds who own their own home fall from 55 per cent to 34 per cent between 1996 and 2016.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: "The idea to allow social housing tenants the right to buy brings with it huge responsibility.
"The sustainability of a mortgage versus rent for those on benefits is a significant risk transfer. In addition building back new stock to replace that purchased has been a systemic failure of previous initiatives. The detail on how this will be achieved will be central as to how future generations measure the success or failure of these ideas.
"For lenders and mortgage advisers we look forward to working with government and our regulators to ensure we do this safely and ensure that we maintain long-term affordability."
Charles Roe, director of mortgages at UK Finance, was optimistic that today’s plans could help more people realise their dream of owning their own home.
Roe said: “Firms are committed to lending responsibly, with regulatory rules in place to ensure that mortgages are affordable – it will be important to carefully consider any changes to ensure they deliver good outcomes for customers throughout the life of the mortgage.
“We look forward to discussing the proposals and will continue working closely with the government to help more people get onto the housing ladder.”
The announcement by Johnson comes at a time when brokers have described the housing market as being in a period of “madness”.
As previously reported by FTAdviser, house prices continue to grow despite rising interest rates.
According to Halifax’s most recent house price index, prices rose 1 per cent in May, the eleventh consecutive monthly rise.
Brokers are not convinced that these measures will alleviate this pressure.
Edward Checkley, managing director of London-based property finance specialists, Advias described the policy as irresponsible.
He said: "This policy would go against all sensible lending practices, considering housing benefit is typically awarded to assist with rental payments if unemployed or on a low income, and to households with less than £16,000 of savings.
“With the cost of living crisis already affecting lower income households, how can saddling them with debt be responsible?"
Housing Benefit is money to help you cover your rent if you're living on a low income.