UK borrowers may see the return of larger, longer-term loans as the government plans a comprehensive review of the mortgage market with the aim of boosting access to finance for first-time buyers. Rather than addressing the real problems with UK housing affordability though, this approach seems to be aimed at helping dig the government out of a housing policy hole, writes Mark Stephens, Mactaggart Chair in Land, Property & Urban Studies.

Abandoning the housebuilding target leaves the government without any meaningful response to the affordability crisis. This has led to the government's new emphasis on the mortgage market: if people can borrow more, then more people will be able to afford to buy houses.

 

But history shows this isn’t always the case. Mortgage lenders will remain limited in the number of high loan-to-income mortgages they can keep on their books. After all, these measures were introduced to avoid the booms in mortgage arrears and repossessions seen in the early 1990s and during the 2008 global financial crisis, as well as the systemic failures that forced the government to rescue multiple banks back in 2008. And while raising the amount that can be borrowed will help some people buy houses, at least some of this extra finance will also contribute to higher house prices as demand for new homes rises. This will benefit existing owners, not first-time buyers.

Read the full article on The Conversation website


First published: 6 July 2022