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Government planning launch of 99% LTV mortgages

Journalist: Rozi Jones, Financial Reporter

ended 22. January 2024

The Government are reportedly considering introducing 1% deposit mortgages to help first-time buyers onto the housing ladder.

But would 99% LTV mortgages increase first-time buyer activity or risk creating a housing bubble?

7 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
The scheme will look good in the headlines for a governent looking for votes from generation rent in the upcoming election, but will sadly help very few borrowers overcome the needed hurdles to house ownership. Whilst many do struggle to raise deposits, the growing disparity between house prices and wages means that the maximum amount an average couple could borrow at 99% LTV would not be enough to buy even a starter home in 90% of the country. Like the 100% scheme already available, it will generate many enquiries but then go on to disappoint many of them with the reality that taking away one barrier, still leaves many others on the housebuying steeplechase course
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Michelle Lawson
Director at Lawson Financial
Yet another desperate attempt at a vote-catcher rather than coming up with something with serious legs but the devil, as always, is in the detail. Affordability and stress testing is more the issue than the deposit for First-Time buyers in most areas due to the house prices. A 1% deposit is dangerous as most would take a long term of say 30, 35 even 40yrs so the borrowers actually pay little off in the early years so there is a high risk of either negative equity or being a mortgage prisoner if not modeled correctly. Serious thought should be given to some of the most vulnerable buyers and the focus should be on Housing being a senior department rather than using it as an election bribe.
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Kylie-Ann Gatecliffe
Director at KAG Financial
One of the biggest issue we see as brokers is first time buyers unable to make the leap onto the ladder because they don't have enough deposit. Rents are constantly rising along with the cost of living, so buyers being able to save a large amount on a regular basis is not something we see very often. So with this in mind, the 99% mortgage idea could be exactly what is needed. But we must be mindful that a scheme like this would definitely increase the amount of purchases taking place, which could push house prices up even further. It is very difficult to bring forward a solution to help more buyers onto the ladder without causing too much demand. Whilst this may be seen as a ploy to gather more votes from those yearning to obtain their first property. It will be interesting to see whether this could materialise into something that helps a lot of people currently stuck renting.
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Graham Cox
Director at Bridging Hub
House prices are falling and the government thinks it's a good idea to allow 1% deposit mortgages? Complete madness. Another lame duck policy initiative designed to buy Generation Rent's vote, whilst leaving them badly exposed to negative equity and doing nothing to address the underlying issue, that house prices are too high. This administration is utterly cynical and shameless in its desperation to cling to power.
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James Bull
Mortgage Broker at JB Mortgages
The housing market is intertwined with the whole outlook of British people. When the housing market is doing well then everything tends to do well due to the feelgood factor. Plus many tens of thousands of peoples livelyhoods are linked to property and housing. Anything the government can do to make it easier for people to get on the property ladder has to be welcomed. I think mortgages with a 1% deposit is a great idea, but if 1% deposit mortgages are offered, why not just go the full hog and offer 0% deposit mortgages. Affordability checks are as stringent as they have ever been so if someone can afford the payments then why not !
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Ying Tan
CEO at Habito
Any efforts generally, to help first time buyers onto the housing ladder are always welcome. However the devil is in the detail, and we must be mindful of any unintended consequences, and ensure it is not just a political move to secure votes. Interest rates are likely to be higher for a 99% mortgage, along with more stringent underwriting. How realsitic will it be for a consumer to only need 1% deposit, given the likely affordability challenges for getting the 99% mortgage? In addition to such schemes, its imperative the governement tackle the underlying challenge of a lack of affordable homes, otherwise a housing bubble will be created. This could push prices up further, beyond the grasp of a first time buyer.
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Amit Patel
Adviser at Trinity Finance
Another ill-thought out idea by a party now desperate to cling into office. This scheme is a recipie for disaster. On paper it sounds like a fantastic proposition but this will only inflate house prices even further and I expect the interest rates will be steep. You then have the issue with the affordability calculations coupled with negative equity should house prices fall in future.