Given the current global situation, you might forgive Prime Minister Boris Johnson for picking and choosing what he focuses on carefully.
With the COVID-19 pandemic still very much here, Boris has had a lot on his plate of late.
But this is not a political forum of course. All we care about is the mortgage industry and Boris only tends to come onto our radar when the government shifts its attention to our favourite topic.
As the Conservative government starts to plan for the future and galvanise the economy, the topic of mortgages has made an appearance.
Speaking at this week’s Conservative Party Conference, Boris has provided some insight into how he will look to enhance the UK’s housing market – something he himself has described as ‘broken’.
One way this will be attempted is by making it easier for first time buyers to get a long-term fixed-rate mortgage, worth up to 95% of the home’s value.
The Prime Minister maligned the limitations of the rental market and the effect of this during the recent lockdown, with people not having gardens and having to ‘use ironing boards as desks’.
He said that many people have an instinct to buy, but are struggling to do so. This, he said, was not so much down to not being able to afford the mortgage, but not being able to afford the deposit to buy their own property.
The rental market only offers properties that occupants cannot truly love according to Mr Johnson, stating that the time to act is now.
Johnson promised to make it easier to access those all-important long-term fixed rate mortgages that makes purchasing a home of one’s own easier, more manageable and more desirable.
The Tories believe this could lead to as many as 2 million more owner/occupiers, helping to turn ‘generation rent into generation buy’.
What do Boris’s plans entail?
It’s too early to say, but reports suggest that ministers have been asked to design the plan, with the exact approach they are likely to take up for debate.
One would assume there would be fewer stress tests for mortgage applicants. It is possible that some kind of state-based guarantee would be introduced to protect lenders and lower the risk associated with the loans they would be offering to first time buyers.
More will become clear over the coming months, with prospective first time buyers and the wider mortgage industry alike set to keep close tabs on any developments.
What problems might there be?
The mortgage market generally is in a tricky spot, like so many markets. The natural inclination to play it safe for lenders doesn’t really align with lending to the perceived riskiest portion of the buying market – first time buyers who have limited deposit capital.
That means this initiative will have to provide some significant reassurance to lenders – reassurance that will only come in the form of monetary guarantees.
These guarantees will have to be substantial. Very substantial. The BBC has bandied about a possible figure in the tens of billions.
That kind of spending might be a good way to boost the housing market in theory. But with an economy in recovery mode and the wider societal picture something of a moveable feast at present, what happens next is hard to predict. Whether stumping up the kind of financial guarantees to make this work is feasible will have to be decided upon.
Getting a first-time mortgage as a contractor
Contractor mortgages and freelancer mortgages have historically been trickier to acquire. Add to this the element of being a first time buyer, and the property market can seem like something of a minefield for anybody working in this way and looking to buy their own home.
At Roots Mortgages, we can help remove headaches and provide you with mortgage services that can help you make that first step and become part of ‘generation buy’ yourself.
To see how much you may be able to borrow, take a look at our mortgage calculator.
