Boris Brings Back Right-to-Buy
The Prime Minister is expected to make a speech announcing plans for people on benefits to be given the chance to buy their homes via the return of the Right-to-Buy scheme
Boris is set to make a major speech in Lancashire vowing to revive Margaret Thatcher’s housing revolution for families on low-income.
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The Right-to-Buy scheme helped millions of housing association tenants purchase their council properties at hugely discounted prices in the 1980s and 90s. The Prime Minister has also drawn up proposals to help families on universal credit get on the property ladder.
Benefits to be counted
Benefits would be counted as income when applying for a mortgage under the new plans, which could open up the dream of home ownership to millions more people.
Mr Johnson is set to argue that:
- £30 billion in housing benefits currently going towards rent could help people secure and pay for mortgages
- A new generation of pre-fab homes will speed up house building
However, critics have pointed out that universal credit is only available to families with less than £16,000 in investments and savings, meaning they would still have very limited access to mortgages with most lenders asking for a minimum deposit of 10%.
The Levelling Up Secretary Michael Gove, has suggested that the government is looking at creating a ‘savings vehicle’ that would not count toward the benefits limit, but it is not currently clear how this would work in reality.
No new funding
Mr Gove has also admitted that there is no new funding attached to the Right-to-Buy extension.
Right-to-Buy would give people discounts of up to 70% on the price of their house, depending how long they had lived in their property..
One Whitehall source has reportedly confirmed there will be ‘something for hard workers on benefits’. No matter what their financial situation, people would be ‘incentivised to save for a deposit’, according to another source.
People encouraged to buy rather than rent
The source added that,
Currently, too many people are spending huge sums of money in the private rental market when that money could be better spent on investing in their future in the form of mortgage payments on their own home.
One source warned the cost of the scheme could reach £3 billion a year, causing plans to open up Right-to-Buy to all 2.5 million housing association tenants to be scaled back.
Mr Gove has been asked to use existing funds for his Levelling up, Housing and Communities Department, as opposed to utilising any new funding that is part of the Right-to-Buy scheme.
Mr Gove confirmed a cap on the number of people who will be able to take advantage of the Government’s new housing scheme. He has suggested more than a thousand people would be eligible and said that he would be discussing the numbers with the housing associations.
Help to save
Speaking on Sky News, Mr Gove added,
We’re looking specifically at a savings vehicle that people can use in order to save for that deposit. Because home ownership is not just good for individuals, it’s good for society overall.’
Mr Gove said the government wants people to have ‘a stake in the future’ by being able to invest in their own homes.
Mr Gove said the government will make sure there are new houses to replace those bought by lower-paid workers under the new Right-to-Buy plans, which he described as ‘a like-for-like, one-for-one replacement.’
He has introduced legislation into the House of Commons that means there will be a new levy on developers, which means that when big housing companies build new homes, the government will extract some of the money they make and some of that will be set aside solely for the building of affordable or council housing.
Problems with Right-to-Buy
However, the opposition remain unconvinced by the government’s grand gesture, with Lisa Nandy, Shadow Levelling Up Secretary, saying there were ‘real practical problems’ with the ideas:
In principle, it’s a great idea to try to get more people the security of their own home, particularly people who find themselves in the benefits system. The problem is that, as always, the government has not thought through the detail. There’s no sign that any of the lenders are on board with this.
Nandy pointed out that while the government can say that it wants to open up mortgages to people on housing benefit, unless lenders agree to this, it won’t happen.
Can you buy your first home?
For those unsure about whether or not they will be able to buy a home, speaking to a mortgage advisor is your best bet:
- Get advice. Mortgages are complex and can be overwhelming, so speak to a mortgage advisor to find out if you have what you need to get a mortgage
- Learn more. If you don’t currently have what you need to get a mortgage, this conversation can point you in the right direction
- Make a plan. Now that you have the advice you need, you can start planning towards saving for your first home
Saving for a mortgage is a long process, as you do need a large amount of money for that deposit, but if you haven’t started saving already, the best time to start is today! Book a call with one of our mortgage advisors to find out more (don’t worry – our advice is completely free!)