‘Generation buy’ mortgages will help support market

PLANS for a state-backed 95pc mortgage scheme for first-time buyers would avert a drop in house prices and help the country to level up, property experts have said.

The Chancellor is expected to announce in Wednesday’s Budget how long-term, fixed-rate mortgages with lending ratios not seen since before the financial crisis would help “turn generation rent into generation buy”.

Government-backed loans on properties worth up to £600,000 will encourage banks to lend to some 36,000, making their first move on to the property ladder every year. Richard Donnell of property site Zoopla said the policy was “good news” for cheaper markets such as in the North East and would support rising prices by unleashing a flood of new buyers into the market.

“This should help to equalise the housing market, especially in those Red Wall areas where the cost of renting is close to the cost of paying a mortgage,” he said.

But others cautioned the move could simply jack up prices, keeping many locked out of the market if not met with an increase in housing stock.

Lucian Cook of Savills, the estate agent, said strong demand from buyers who could afford high rents but could not put enough money aside for large deposits would support house price growth over the next five years. Prices were up 8.5pc at the end of 2020.

But the Government’s official forecaster the Office for Budget Responsibility has penciled in a 8pc fall in house prices over the year, expected to hit as the stamp duty holiday and the £50billion furlough scheme comes to an end.

Dominic Agace of Winkworths, another estate agent, said: “This is a positive solution to the current conundrum in the property market where properties under £600,000 have been increasingly difficult to sell, due to lower mortgage availability. “

Richard Donnell, of property site Zoopla said the policy was good news for cheaper markets such as in the North East and would support rising prices by unleashing a flood of new buyers. “This should help equalise the housing market, especially in those Red Wall areas where the cost of renting is close to the cost of paying a mortgage,” he said.

The proportion of 25-to-39-year-olds who own their own home almost halved between 1991 and 2016, falling from 67pc to 38pc, The average deposit stands at around £30,000. Renters are only able to save £3,000 a year on average.