The loan must return to “normal” before 95% of the LTVs return

According to Mike Brown, director of Crystal Clear Financial Services, loans must return to “normal” trading before 95% LTV products start rolling out.

Prime Minister Boris Johnson has announced plans to turn Generation Rent into Generation Buy by encouraging lenders to take back 95% LTV loans.

Under Johnson’s proposal, banks would no longer be required to ask applicants for finer details of their earnings and expenditures.

However, while Brown believes the Generation Buy aspiration is a good idea, he explained that it’s something that needs to be carefully crafted.

He said: “If something like this were to be implemented, the impact on brokers would be excessive at the moment, demand would outstrip supply and a significant amount of time would be spent working on options with clients.

“Overall for the market, it would be too little equity at a time when the economy and housing market are fragile, so overall I’d say a good idea, but not now!”

Jeremy Duncombe, director of intermediary distribution at Accord Mortgages, has a similar outlook to Brown.

He pointed out that while support for first-time buyers is essential for the market, there is too much uncertainty about what the government’s “Generation Buy” initiative will mean for homebuyers, brokers and lenders.

According to Duncombe, the rise in house prices combined with the end of stamp duty could have an impact on the volume of transactions.

He went on to point out that current regulatory stress testing requirements mean that for many borrowers the affordability calculations don’t add up.

Duncombe said: “While buyers are able to find a home and get their finances in order, securing a mortgage in the current climate is much more complex.

“The criteria have changed and although we may see some restrictions reduced in early 2021, it is arguably more challenging for applicants.

“For the market to recover properly, the availability of higher LTV products needs to be increased. More choice can only be beneficial for everyone “.

Sarah Tucker, founder and chief executive of The Mortgage Mum, believes Johnson’s scheme is a positive move by the government.

He said: “There are up to two million people who can afford the mortgage payments and cannot get a mortgage!

“During the lockdown we saw so many discouraged first-time buyers eagerly saving for their first home and feeling crushed when 95% mortgages were taken off, closely followed by most. of the offer of 90% “.

However, Tucker pointed out that the idea of ​​lenders loosening affordability rules makes her feel uncomfortable.

He pointed to the financial crisis and explained that he believes accessibility and stress testing are necessary.

Tucker said, “I don’t think we should be trying to loosen accessibility rules, but I think about 95% of LTV mortgages would be a great thing to help people climb the property ladder.”

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