The Government’s first-time-buyer mortgage revolution

The Government’s first-time-buyer mortgage revolution

It’s a problem that’s dogged governments for the last 20 years – how do they manage to get more young people into home ownership whilst avoiding artificially depressing the market?

The answer was never going to be simple, and whilst UK housing remains in such high demand, with many people see it as one of the most secure investments around, it’s very unlikely that prices will drop sufficiently to allow thousands of young buyers into the market without some kind of help.

As the requirement for housing changes with generations looking to move into city centres and into busier towns, the issue then changes and requires more innovative solutions. There’s always likely to be high demand for quality housing in wealthier rural areas, however, many young people now need to move into the cities for work and a career.

Long gone are the days of easy employment opportunities in smaller towns and villages as the economy has shifted towards services, finance and creative industries. There is little in the way of manufacturing and where lower paid work may have once been found in factories and mining, it has now moved into the gig economy and amazon warehouses.

So, with the government’s plans to try and get more people on the housing ladder now taking shape, we take a look at what they entail, and what effect they could have on the market for investors.

95% Mortgages

The latest proposal by Boris Johnson’s government is to ensure that First Time Buyer’s have access to 95% mortgages.

According to The Metro, who attended the Conservative conference where the PM was giving his speech, “Mr Johnson said he would ‘transform the sclerotic planning system’ and make it faster and easier to build new homes ‘without destroying the green belt or desecrating our countryside’. He added: ‘But these reforms will take time and they are not enough on their own.’”

To imagine that any single measure would have any sort of instantaneous effect would indeed be naive, and simply putting young buyers into further debt will not be a silver bullet either. The government is right in saying that a range of measures will need to be introduced.

But also, there probably needs to be a recognition that today’s housing market has younger tenants that are perfectly happy with the freedom that renting provides.

Whilst it’s absolutely true that there is a significant section of younger renters that need assistance to make their way into the housing market, there’s growing research available that shows attitudes changing towards renting.

It’s therefore quite unlikely that a significant number of young buyers would then leave the Private Rental Sector. The market, at the moment, is booming with investors more than happy with significant yields and rental growth, and renters more than happy with a superior choice for their housing.

Many more are now choosing to move into the cities for work and study, and with unprecedented demand from investors for these types of properties, there’s now much better choice for these renters.

Whilst the government is right to try and address those who would like to enter the market, perhaps the government are overestimating their numbers.

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