Good news for first-time buyers – but proceed with caution

Boris Johnson has announced that he is to ensure that 95% mortgages are available for first-time buyers…

On the face of it, this is great news and should be welcomed.

As I wrote some weeks ago, the missing ingredient to the current housing ‘boom’ was the ability for first-time buyers to get on the property ladder.

This had the potential to stifle the property market because it needs people to buy starter homes so that the rest can keep moving.

Now that the Prime Minister has announced that he will enable 95% mortgages – through the Government providing a state guarantee to lenders – that obstacle could be about to move.

By removing the stress tests carried out by banks for mortgage applicants and providing a state guarantee, the Government will help up to two million people to own their own homes.

But it should come with one caveat – can we afford to take on this 95% loan? And should we be doing so during the current uncertain economic climate?

If we go into a full lockdown again, the housing market will stall again and where will we be?

If the economy continues to be uncertain, more job losses could follow and people with large loans might suddenly find themselves unable to pay them back.

And of course, if this is a bubble and it bursts, if house values fall, then some may find themselves in negative equity with a huge loan for a house worth less than they bought it for.

This may all sound a little pessimistic and I do remain hopeful that the current upturn in the housing market goes on. The Halifax reported this week that the number of mortgage applications in the UK is at an all-time high. The average price of a home rose by 1.6% to £249,870 in September from August.

But my continued advice is to proceed with caution, get the best advice on what property you can afford and take a measured decision.

For a free, no-obligation discussion on this or any other mortgage or insurance-related issue, please give me a call on 01723 384558 or 07767 692 653 or email me at

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