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Government announces plans to boost home ownership

The government has set out its plans this week to boost home ownership and make it easier for people to get low deposit mortgages. Here, Caroline Murray, partner and head of Graysons’ property team offers a summary of the proposals.

home ownershipThere are three proposals:

  • Right to Buy scheme extension to housing association tenants
  • Mortgage lending market review: making it easier to get low deposit mortgages
  • ‘Benefits to Bricks’: a plan to make it easier for people on benefits to save for a house deposit

Right to Buy scheme for housing association tenants

The Right to Buy scheme has been available to council house tenants since 1980 and between 1980 and 2020, just under 2 million homeowners benefitted from the scheme.    It offers the opportunity for council house tenants to buy their council homes at a discount.  The Right to Buy scheme has now come to an end in Wales and is only available in England and Northern Ireland.

The new proposals plan to extend the Right to Buy scheme to tenants of people living in housing association properties, giving millions of people the chance to own their own homes. For each housing association property purchased, the government says another one will replace it.

The current Right to Buy scheme offers council house tenants the opportunity to buy their council house at a discount of up to 70%, depending on how long the tenants have lived in the property, up to a maximum discount of £87,200 in England (£116,200 in London).

There is already a scheme in place to enable tenants of housing association properties to buy their homes – Right to Acquire.  However, the scheme is less generous than Right to Buy, offering a maximum discount of between £9,000 and £16,000 depending on where the property is.

Extending the Right to Buy scheme to housing association tenants will allow them to take advantage of the same discount as council house tenants. The number of people taking advantage of the scheme will be capped, but the cap level has not yet been announced.

The scheme will not be available to renters in the private sector.

Reviewing the mortgage market

In his announcement about the review, Boris Johnson says that “The ever-spiralling price of a house or flat has so inflated deposit requirements that saving even just 10% is a wholly unrealistic proposition”.

To address this, an independent review of access to mortgage finance for first-time buyers has been launched with the aim of making it easier for them by “widening access to low-cost, low-deposit finance such as 95% mortgages”. The review will report back in Autumn this year.

Benefits to Bricks

This is a plan to change the welfare rules so that people who are claiming benefits can buy their own homes.

For example, people on Housing Benefit, but in work, will be able to use this benefit towards a mortgage.  If those people can save a deposit to buy a home, the government will then give them the same amount of money as the Housing Benefit they received towards a mortgage, rather than it going directly to a landlord or housing association.

There is also a plan to change the Universal Credit rules, to allow those who claim this benefit to save for a mortgage deposit.  At present, Universal Credit starts to taper when a claimant has savings of £6,000 and stops completely when those savings exceed £16,000.  The government has announced that Lifetime ISA savings (an ISA that allows people to save and receive a 25% bonus from the government of up to £1,000 per year towards their first home) will be exempt from these rules, allowing people to make savings in this type of account without it impacting their Universal Credit benefit, until they have enough for a deposit to buy their first home.

home ownership

Caroline Murray

There will also be support for existing homeowners by improving the rules relating to Support for Mortgage Interest (SMI) – a loan to help people who are claiming a qualifying benefit to pay interest on their mortgages if they lose their job.  At present, this loan is available after nine months of unemployment.  This will be changed so that it kicks in after three months of unemployment.

Caroline Murray says:

“Any plan to make it easier to buy a home in the current climate, with rising property costs and interest rates, has to be a good idea.  We have helped many clients to buy their council properties in the past and look forward to helping housing association tenants in the future.”

If you are looking to buy or sell property, contact our experts now, or get a free, no-obligation quotation using our online quotation system.

Author: Caroline Murray, partner and head of our property team.

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