Today, Prime Minister Boris Johnson announced the extension of the right-to-buy scheme. Following on from this speech, a selection of finance experts and mortgage brokers shared their thoughts with IFA Magazine:
Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “This is the ultimate political meringue: sweet, lightweight and with very little substance. Homeownership levels are lower now than they were in 2010, and we know that vast swathes of right to buy houses have ended up in the hands of private landlords. We don’t need more right to buy schemes, we need to get more homes built and to bring down the cost of buying and owning a home. Talk about fiddling while Rome burns.”
Sabrina Hall of Lichfield-based Kind Financial Services: “As is often the case with these announcements, the devil is in the detail but as it stands I can’t work out how this would possibly work. It’s simply a huge distraction from #partygate. Most people or families that rely on housing benefits don’t have much, if any, disposable income, so what happens if they purchase their own home and suddenly they need a new boiler, a roof repair or a replacement kitchen? Will the Government increase their benefits to cover the costs of maintaining their home? Is this about giving people financial security or cutting costs? A mortgage also requires additional costs such as buildings insurance. Also, while it’s not required, I would suggest that it wouldn’t be recommended to take a mortgage without life cover if it’s a joint mortgage so as not to leave a remaining party trying to repay the entire mortgage on a single income in the event of a death. Again, is the Government going to factor all this into the benefits in order to encourage homeownership? If a person’s circumstances change, will the Government look to improve the support package that they have for homeowners to reflect the fact that they have encouraged people to take out mortgages on these properties? Currently, you would only get support paying the interest on your mortgage and only by way of a loan, which is repaid if you sell the property.”
Oli Pearce, director at Wellingborough-based Guild Mortgage Services: “The whole policy package seems like political waffle to me. Last time I checked, lenders dictate what income they will allow for a mortgage application. The real issue here, which isn’t being addressed, is the lack of homes being built and availability of stock. That is the problem with the property market.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com: “This is a policy put together at breakneck speed to get Boris Johnson back on his feet after a turbulent week. The mortgage market is in good health and many in the industry will be scratching their heads at the idea of a comprehensive review. If it ain’t broke, don’t fix it. As noble as these intentions around home ownership are, whether they will ever come to fruition is another thing entirely. In the property market, bureaucracy and red tape have a habit of getting in the way. Homeownership is an emotional issue and on Thursday we saw Boris Johnson trying to reconnect with the public, many of whom have lost faith in him and his Government. This felt like a General Election speech, not a speech on a grey day in Blackpool in June.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “The benefits proposal is a bit leftfield and I’m not sure lenders will like it. Using benefits, especially housing benefits or Universal Credit, is not ideal to base a mortgage on and even if it is used it is unlikely to boost borrowing eligibility enough to make a big difference. As far as the new right to buy scheme is concerned, this may help some but it is a bold claim that every house sold will be replaced by another to ensure social housing does not reduce further. Given the fact that the Government have failed to get close to any housebuilding targets, this seems a big ask. As ever, the devil is in the detail, and the Government has a record of announcing so-called market changing initiatives only for it to achieve very little. Why a review of the mortgage market is needed to see if deposits can be reduced borders on farcical. Borrowers can get loans with a 5% deposit already and reducing that further just means that more are at risk of negative equity if things go wrong. All of these schemes seem to be demand-sided, which keeps the prices of properties high without addressing the real supply side issues. The Government would be better off to nationalise a housebuilder and build their own affordable housing in places people want to buy or create new places complete with infrastructure that make it appealing.”
Doug Miller, director at Bath-based independent mortgage broker, Lansdown Financial Services: “Boris, yet again, has failed to address the fundamental issue of the current housing market. Until the crisis around the shortage of houses is solved, the ever-increasing demand for property will continue to see house prices soar. Those that predicted that rising interest rates, out of control inflation and the rise in living costs would immediately translate into a housing market crash have been proved wrong. Over the past few months our level of mortgage enquiries demonstrates that demand remains as strong as ever, with many people needing to offer well over the asking price for properties in many areas of the UK. Until this supply shortage is addressed, the measures announced Thursday will simply exacerbate the situation we are currently in, not to mention that is highly likely mortgage lenders will struggle to adjust their criteria and adapt to these new rules.”
Marcus Wright, MD of Bolton Business Finance: “Boris is trying to shake the #partygate hangover with a housing party for 2022. The “benefits into bricks” slogan is certainly a catchy one and is likely to go down very well with working class voters. Homeownership is still the dream for a large number of renters in the UK. Also it doesn’t look like the housing market will be slowing down any time soon, if new measures are introduced to make it easier to get a mortgage.”
Fanny Snaith, a Cheltenham-based certified money coach: “Whether Thursday’s speech will be a vote winner only time will tell. For now, all we know is that the price of property will have to be lowered considerably for renters to be able to afford to buy given the size of deposits required. Buying high and selling low is just one risk. More broadly, I can’t see how the figures will stack up. Again, a lot of Boris nonsense.”
