"Brokers can expect six months of being asked questions regarding something they have no information about."
Following reports yesterday evening, Johnson unveiled the plan during a speech in Blackpool today. He said: "We're going to look to change the rules on welfare, so 1.5 million working people who are in receipt of housing benefits, I stress working people, and want to buy their first home will be given a new choice: to spend their benefit on rent as now, or put it towards a first ever mortgage. Doing so removes a significant barrier that currently prevents hundreds of thousands of families from buying their own home."
He added that to remove another barrier to homeownership, "we're going to explore discounting Lifetime and Help to Buy ISA savings from Universal Credit eligibility rules".
In addition, a mortgage review, to be published this autumnn, looking at how low-deposit mortgages could be extended.
Johnson also confirmed an extension to Right to Buy rules, giving thousands of households in housing association properties the right to purchase their home at a discounted price.
Discussing the 2.5 million households whose homes belong to associations, he said: "They're trapped, they can't buy, they don't have the security of ownership, they can't treat their home as their own or make the improvements that they want. So, it's time for change. Over the coming months we will work with the sector to bring forward a new Right to Buy scheme."
However, the announcements were met with criticism from experts in the mortgage and housing sector:
New housing benefit rules
Shadow Levelling Up Secretary, Lisa Nandy, commented: "There are real practical problems, to qualify for Universal Credit, you've got to have savings of less than £16,000, which means that most people who the Government are trying to reach with this announcement are not going to have anything near the amount that they need for a deposit."
Edward Checkley, managing director of London-based property finance specialists Advias, said: "This policy would go against all sensible lending practices, considering housing benefit is typically awarded to assist with rental payments if unemployed or on a low income, and to households with less than £16,000 of savings. With the cost of living crisis already affecting lower income households, how can saddling them with debt be responsible?"
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, commented: "Mortgage lenders already allow people to use state benefits to support a mortgage and have done for years. It varies from lender to lender exactly which state benefits they'll take into account, so I'm not sure what a new policy could be. It's almost as though they don't know how the mortgage market works already. If we're to believe they want higher LTV mortgages, there's only one place to go, and that is 100% LTV. However, again, we already have 100% LTV as a couple of lenders allow you to take a personal loan as a deposit. It's more bluster from the blond blancmange. Just resign for God's sake and let someone with an ounce of competence and integrity have a crack."
Rhys Schofield, managing director at Belper-based Peak Mortgages and Protection, added: "As ever, we can expect the government to make some headline grabbing announcement but with no detail on how to get there. Therefore, brokers can expect six months of being asked questions regarding something they have no information about."
David Binney, commercial manager at Norton Home Loans, said: "At Norton Home Loans, we have always taken the stance that benefits bar housing benefit should be considered in any assessment for a mortgage and so it forms an integral part of our criteria, as we want to offer those on potentially lower incomes the opportunity to own their own home. Our view is that those on lower incomes are under served by the general lending community and so we welcome the government’s stance, which we hope will lead to more lenders considering a wider range of borrowers.”
Right to Buy
Andy Sommerville, director at Search Acumen, said: "We can only hope the Eighties tribute act of Government housing policy is quickly followed up by greater commitments to deliver genuine transformation and create a property market fit for the 21st century. No-one can question the desire to make homeownership more accessible, but Right To Buy v2.0 is not a sequel that aspiring buyers will be flocking to see in meaningful numbers.
“We need broader structural reform to planning and construction that goes beyond political soundbites, and accelerated tech adoption in place of endless talk about turning Generation Rent into Generation Buy."
Graham Cox, founder of Bristol-based broker SelfEmployedMortgageHub.com, commented: "This is the last desperate throw of the dice from our sorry excuse of a PM. It's like he's learnt nothing. Right to buy is a disaster. Local authorities have no incentive to replace sold-off properties, knowing they'll be sold for a large discount a few years later. The result: increased homelessness, incredibly expensive and often poor quality private rental accommodation, and a skyrocketing housing benefit bill. Still, as long as it appeals to the PM's core voter base."
Abigail Davies, director in the Savills housing consultancy team, added: “The 18 month pilot of the Right to Buy extension showed that the cost to government was higher than grant-funding new homes for rent and shared ownership, the number of purchases compared to applications was comparatively low. Housing associations also face significant challenges in replacing the social rented homes sold with properties at the same low rents. This comes at a time when supply of new affordable homes is already likely to fall, as housing associations switch their focus from development to investing in their existing homes to improve fire safety, quality and energy efficiency.
“Overall, there are better and more efficient ways than a housing association Right to Buy to support lower income households to become home owners.”
