Sunak Discusses Plan to Create ‘Generation Buy’, Bucking Prior Trends
For years, the UK has been blighted with the prospect of an entire generation being priced completely out of the property market. An issue in almost all areas of the country, prospective first-time buyers have found it increasingly difficult to qualify for mortgages with excessive initial deposit requirements.
This demographic has long been dubbed ‘generation rent’, an unfortunate reference to the likelihood of most within this group being forced to rent homes for a lifetime.
But this is something that could be set to change, due to a series of new measures and reforms being introduced by the government. At least, according to Chancellor Rishi Sunak, who has boldly claimed that ‘generation rent’ will be transformed into ‘generation buy’.
Specifically, he believes that the extension of the stamp duty holiday and a new government incentive scheme that will guarantee 95% mortgages will make a real difference to the first-time buyers.
He stated with confidence that the initial stamp duty holiday had “helped hundreds of thousands of people buy a home and supported the economy at a critical time”, suggesting that even greater numbers of buyers could benefit from the second instalment of the suspension.
Meanwhile, banks are to be offered government guarantees in return for reintroducing 95% LTV mortgages with a deposit requirement of just 5%. As the vast majority of struggling first-time buyers cite elevated deposit requirements as their main barriers to home ownership, this new initiative could make a real difference.
Speaking on behalf of NatWest Group, head of mortgages Lloyd Cochrane welcomed the government’s decision to encourage lenders to bring back 5% deposit mortgages.
“For those customers with smaller deposits looking for a mortgage, particular younger or first-time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic,” he said.
“A government-backed mortgage guarantee scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.”
Likewise, Wilsons’s tax consultant Imogen Lea said that the extension of the stamp duty holiday would help ensure those who may have missed out the first time around will have ample opportunity to make significant savings.
“The welcome three-month extension to the SDLT holiday gives potential property investors a second chance to purchase with no SDLT up to £500,000,” she said.
“The extension to properties valued at £250,000 or less, which will be introduced in July and run to 30 September, could see more sustained growth in buy-to-let investments in parts of the country where property prices are lower, or in smaller dwellings,” Imogen added, highlighting the potential benefit of the extension for BTL Property Investors.
However, critics have argued that the government’s efforts to improve access to the property market for first-time buyers do nothing to help renters and mortgage payers who have fallen into arrears due to the COVID-19 crisis.