Benefits, Mortgages and the New Right to Buy

Forgive the sense of exasperation as we hear many people in the Housing Market look to the Heavens and say, “Here we go again”, but Boris has been talking about boosting the housing market by getting lenders to accept benefits towards a mortgage and introducing a new Right to Buy Scheme.

The benefits one is a bit strange, and I am not sure lenders will like it. 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.

Also, there is a question mark around eligibility that could change through the borrower’s circumstances or changes in policy around who is eligible. If someone is relying on it and it gets taken away or reduced, then that is a risk if the mortgage then becomes unaffordable.

I think this one will simply be ignored and quietly disappear!

Right to Buy

As far as the new right to buy is concerned this may help some but it is a bold claim that every house sold will be replaced by another to ensure social housing does not reduce further. Given the fact that they have failed to get close to any housebuilding targets, this seems a big ask.

As ever the devil is in the detail, and the Government has a record of announcing so-called market-changing initiatives only for it to achieve very little.

Why a review of the mortgage market is needed to see if deposits can be reduced borders on farcical. Borrowers can get loans with a 5% deposit already and reducing that further just means that more are at risk of negative equity if things go wrong.

All 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.

It all smacks of more than a little desperation to follow Thatcher’s path and convert a whole new swathe of people to become Conservative voters, without really making much sense or getting to the root of any particular issue.

Increasing Rates

More importantly, we have seen SWAP rates spike again dramatically this week which is causing a lot of lender and broker angst. One lender, Hodge, has decided to stop lending for a bit to let the market and their service settle down, whilst others are braced for more sudden rate withdrawals and repricing upwards.

Unfortunately, some who have been quoted a rate today will find it more expensive tomorrow.

All of this is before the Bank of England announcement on Thursday at noon which will almost undoubtedly see another rise in the Bank Base Rate of at least 0.25%. In fact, a good few are expecting a hefty rise by another 0.5%.

Either way, there is no end to these rises just yet and buyers need to be speaking to brokers as soon as possible and making quicker decisions than normal after taking proper advice.

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 2.54% (4.00% APRC) and 5-year fixes from 2.55%, (3.90% APRC), whilst variable tracker rates are around from 1.75%, (3.30% APRC).

Those looking at Buy-To-Let can now obtain products from 1.64%, (4.60% APRC) for a 2-year tracker or 5-year fixes are available from 2.54% (3.90% APRC).

Have a great week! 😊