In a statement from Downing Street, the Government said Johnson would reaffirm in a speech in Lancashire today his “ambition to unlock the opportunity of home ownership for more people through helping those in a position to buy, to access the mortgage finance they need, ensuring people are incentivised to save for a deposit no matter their financial situation, and improving the supply of housing across the country”.
Media reports have suggested that this would include extending Right to Buy to housing association tenants.
Currently, Right to Buy allows most council tenants to purchase their council home at a discount if they meet certain criteria. This includes if it is their main home and self-contained, if they are secure tenants and have had a public sector landlord for three years.
A report from The Times suggested the maximum discount could be up to 70 per cent, but this was not confirmed by secretary of state for Levelling Up, Housing and Communities Michael Gove on LBC this morning.
The report also said that Gove had secured agreements with housing associations to replace every property sold with another to ensure social housing stock is maintained.
On LBC Gove said many people on in-work benefits were already paying significant sums in rent, and if this was converted into mortgage repayments then they would be able to “handsomely meet their mortgage repayments from their overall income”.
He added: “One of the things I want to do is extend home ownership across the country, and there’ll be many people in the North, the Midlands and the South West who will be well able to get on the property ladder using the amount they currently earn and receive in Universal Credit.”
According to the National Housing Federation, housing association provide homes and support for around six million people across England.
Another possible proposal would be allowing borrowers to use housing benefits to secure mortgages and make monthly payments.
Currently lender attitudes to benefit income are mixed, and are more cautious if it is the sole form of income or exceeds more than half of the would-be borrower’s total income.
According to Criteria Brian, 20 lenders will potentially accept income where it is primarily made up of benefits. This compares to 50 lenders who said they will not accept income which is mainly made up of benefits.
The latest statistics from the Department for Work and Pensions state that are around 2.6 million people are on housing benefit in the UK.
Reports also suggest that Johnson will launch a review of the mortgage market to explore ways to reduce the deposit needed by borrowers to secure a mortgage.
Proposals are ‘demand-sided’ and don’t address supply issues
Andrew Montlake, managing director of Coreco, said that the benefits proposal was “a bit strange and not sure lenders will like it”.
He said: “Using benefits, especially housing benefits or universal credit is not ideal to base a mortgage on and even if it is used it is unlikely to boost borrowing eligibility that much to make a big difference.”
He added that there were questions around eligibility, as borrowers circumstances could change and policy changes could alter eligibility.
“If someone is relying on it and it gets taken away or reduced then that is a risk if the mortgage then becomes unaffordable,” Montlake added.
He said the Right to Buy extension could help some but it was a “bold claim” to say that every household sold would be replaced as the government has failed to meet its housebuilding targets.
Montlake said a review of mortgage market to see if deposits could be reduced was “farcical” as borrowers could get a loan with five per cent deposit and reducing that could risk negative equity.
“All of these schemes seem to be demand sided that keeps the prices of properties high without addressing the real supply side issues. The government would be better off to nationalise a housebuilder and build their own affordable housing in places people want to buy or create new places complete with infrastructure that make it appealing.”
Chris Sykes, technical director at Private Finance, said that it was a “nice sentiment” but it was unclear as to how it would work.
He pointed out that to qualify for housing benefit you needed to have less than £16,000 in savings, so that would make raising a deposit challenging.
Sykes added: “Through the Right to Buy scheme you can use the discount as deposit it often isn’t enough as often it will be lower earners in the property so cannot mortgage as much as they’d hope.
“Then by nature of you being on housing benefit your other income will be low, so especially with the cost of living affecting lenders affordability those on lower income will have lower and lower borrowing capacity, lenders need there to be excesses in affordability and if you are living on the breadline then it is unlikely that you have the excess in affordability necessary, as well as the fact lenders generally use ONS data on expenditures, where those on benefits might have much below ONS spending averages due to where they shop, what they have to eat and so on.”
