New Right to Buy scheme extended

The Prime Minister has announced plans allowing those renting from housing associations to buy their houses outright.

In a speech earlier this week, he has confirmed an extension of the popular Right to Buy scheme, which has allowed tenants to purchase social housing since the 1980s.

The scheme was first introduced under Margaret Thatcher’s Conservative party, seeing around two million council homes move into private ownership.

Currently, tenants in council homes are eligible to buy their homes at a discounted price, up to 70% off the market value dependent on how long they have lived there. However, the scheme is less generous for those in homes owned by housing associations.

The Prime Minister has pledged to build replacement social homes for each one sold under Right to Buy.

Boris Johnson said: “Just as no generation should be locked out of home ownership because of when they were born, so nobody should be barred from that same dream simply because of where they live now.

“For four decades it has been possible for council home tenants to use a discount to buy the property they live in.

“Over that time almost two million people have been helped into home ownership.

“They have switched identities and psychology, from being dependent on the state for every repair – from damp-proofing to a new front door – to being in charge of their own family home, able to make improvements and add value as they please.”

The government will also launch an independent review of access to mortgage finance for first-time buyers, with the aim of making it easier for this group by widening access to low-cost, low-deposit finance such as 95% mortgages.

Currently, soaring house prices, stringent mortgage lending restrictions and high deposit requirements are hampering the ambition of many young people who want to own their own home.

Over 50% of today’s renters could afford the monthly cost of a mortgage – but various constraints mean only 6% could immediately access a typical first-time buyer mortgage.

This will be the first comprehensive review of the mortgage market for a decade.

“We have a ludicrous situation whereby plenty of younger people could afford to make monthly mortgage payments – they’re earning enough to cover astronomical rent bills – but the ever-spiralling price of a house or flat has so inflated deposit requirements that saving even just 10 per cent is a wholly unrealistic proposition for them,” Mr Johnson continued.

“First-time buyers are trying to hit a continually moving target.

“And of course the global rise in the cost of living is only making life harder for savers.

“So we want it to be easier to get a mortgage.

“Reporting back this Autumn [the review] will look at how we can give our nation of aspiring homeowners better access to low-deposit mortgages.”

The Prime Minister has also pledged to turn ‘benefits to bricks’ – changing welfare rules so that the 1.5 million people who are in work but also on housing benefit will be given the choice to use their benefit towards a mortgage, rather than automatically going directly to private landlords and housing associations.

If a hard-working family saves a deposit to buy a home, the government will back them with the same housing support that they would have used on their rent, to pay towards their mortgage instead.

The government will also change the rules to incentivise those who are claiming Universal Credit to save for a deposit.

Currently, welfare rules taper the amount of Universal Credit received when the claimant’s savings exceed £6,000, and it stops entirely when savings exceed £16,000.

The government says it will “commit to exempting Lifetime ISA savings from these rules” – meaning hard-working people can save a little each month specifically for a deposit without impacting their Universal Credit payments, until they have enough for a deposit for a first home.

To support existing homeowners, the government will also improve support for mortgage interest (SMI) – a loan which helps claimants pay interest on their mortgages and stay in their homes if they lose their jobs.

Currently, this only kicks in after nine months of unemployment so the government will bring this forward to three months.