The government-backed 95% mortgage system is set to bolster the real estate market, but transportation companies may face more pressure as the real estate industry gets busier.
The government announced a new 95% mortgage guarantee system in last month’s budget that allows homebuyers to secure a mortgage with as little as 5% security deposit.
The new state mortgage system stipulates that the government will subscribe over 80% of the part of the mortgage (for a 95% loan the remaining 15%). Many in the industry believe this will be a welcome boost for first-time buyers struggling to get on the property ladder.
However, experts in the field raised their concerns following the announcement of the government’s new low deposit mortgage. It has been suggested that this is likely to weigh even more on real estate professionals – while it is already a bottleneck in transactions due to be completed before the extended stamp duty vacation period expires in late June.
James Forrester, General Manager of Barrows and Forrester Estate Agents, commented:
“At first glance, the recently announced ‘Boris Mortgage’ is a welcome idea to strengthen the real estate market. However, if transactions are almost again high, there is a risk that this initiative will lead to overheating. Not only a problem for buyers in terms of constantly rising property prices, but also in terms of more time added to the already considerable delays at the end of the transaction process. “
Ged McPartlin, General Manager of Ascend Properties, said:
“If you think the housing market is hot in 2020, add another stamp duty extension, low interest rates, and now a government-backed, deposit-subsidized mortgage system, and you can expect the temperature to go even further in 2021.” increases.
“It’s good news for homeowners and those who believe that once the economy recovers from the pandemic, it will need a strong real estate market to get out of purgatory.”
Islay Robinson, CEO of Mortgage Brokers at Enness Global Mortgages, expressed concern about the program, saying:
“Converting Generation Rent to Generation Buy is a noble initiative, but not when it comes at the expense of more general market health.
“95% of any form of mortgage product puts the market in quite an overheated, dangerous area, and we’ve seen the results of these types of precarious loans before those who are not really in the financial position to commit.”
According to Statons, the number of LTV (loan-to-value) mortgages has increased significantly from 95% in the past few weeks, which has created new demand for real estate.
Heather Powell, Head of Real Estate at Blick Rothenberg, believes the program addressed a major problem in the real estate market, she said:
“The government should be congratulated for the immediate implementation of a policy which, exceptionally, has generated a response that is precisely in line with its objectives …”
“………. It is not just current homeowners who benefit from an active housing market. A significant drop in activity in this, the largest element of the housing market, is affecting many businesses.
“Real estate agents, surveyors, transportation companies, furniture and home furnishings retailers, their supply chains, and local construction companies all depend on an active housing market. These companies in turn all contribute to their local economy … “
Many well-known lenders have signed up for the mortgage system, which can be used to buy property up to a maximum value of £ 600,000 and is open to both first-time buyers and existing homeowners.
Starting today, first-time buyers can borrow five and a half times their wages as part of the first mortgage of its kind in nearly a decade, as Britain’s largest building society, Nationwide, will offer borrowers a 10 percent down payment, giving people the opportunity to stretch their incomes to help them grow bigger Can afford loans.
Before the 2007 banking crisis, some lenders allowed borrowers to withdraw up to seven times their income. Since the 2010s, buyers have generally only been allowed to borrow four and a half times their income.
Nicholas Morrey of mortgage broker John Charcol commented on the nationwide mortgage deal. He said:
“The last thing anyone wants is a return to lenders, allowing people to get mortgages for more than they can afford, but if they can really take on a bit more debt, that’s certainly a good thing .
It’s great to see Nationwide try to offer multiples with higher income. “
Henry Jordan, director of mortgage at Nationwide, said.
“We want to address one of the main barriers to climbing the real estate ladder – and that is affordability.
“Through the pandemic, we’ve seen a lot of people save more money to leave bail, but still struggle to buy the home they want or need due to the limited affordability.”
Nationwide’s new mortgage is designed to help private renters get on the real estate ladder.
“Many tenants still strive to own their own home, but affordability remains one of the main problems that keeps many from getting on the home ladder. Over the past 10 years, the average price of a first-time home buyer has risen 41 percent, while the median income has only increased 18 percent. “
Henry Jordan, Director of Mortgages for the Nationwide Society, says:
“There are nearly five million private rental households in the UK, but many of these tenants have dreams and aspirations of buying their own home. However, as household income rises more slowly than house prices, many first-time buyers find it increasingly difficult to get onto the real estate ladder. “
Housing Secretary Christopher Pincher says the government has done a lot to support the housing market and first-time buyers, and they are determined to help people get on the property ladder.
The Tory MP emphasizes in a column for Zoopla that there are now new options for first-time buyers. He wrote:
“In a year that has put us to the test like no other, we have never felt connected to the place where we are at home and the feeling of security and comfort that goes with it.
“Recent surveys have shown that the desire to own home has increased during the pandemic and many people are trying to take their first step on the residential ladder.
“We recognize the challenges potential first-time buyers face, and for many, the dream of owning home feels unattainable.
“This is why applications were made this week for our 95% mortgage guarantee system – just one of several flexible home ownership systems put in place by this government.
“Surveys show that 69% of private renters and 63% of people who live in their family home have difficulty finding many mortgages with a low deposit.
“This allows more households to access mortgages for both new and existing properties without the need for large deposits.
“First time buyers can buy a home with as little as 5% down payment – that is, they can buy their home after saving a lesser amount in advance.
“As we recover better from the pandemic, we are determined to do everything we can to support first-time buyers and the real estate market.
“We’re building more homes – in 2019 a commitment was announced to build 300,000 new and attractive homes per year with an investment of over £ 12 billion in affordable housing over the next five years – the largest investment in a decade.
“Expanding the drive to own home is a key task for this government. The 95% mortgage guarantee system is another step in improving the land and bridging the homeownership gap. “