‘Generation buy’: Boris Johnson signals relaxation of mortgage rules to allow first-time buyers onto the housing ladder

Initiative comes as Conservative conference aims to shift focus onto domestic agenda

Regulations introduced in the wake of the 2008 crash to take risk out of the financial system could be reversed to help young people onto the housing ladder, prime minister Boris Johnson has indicated.

Mr Johnson has asked ministers to work up plans to allow more mortgages to be offered with a 5 per cent deposit, to help would-be homeowners who are currently locked out of the market by the demand for deposits of 15 or 20 per cent of the property’s value.

He told the Daily Telegraph that he wanted to create a “Generation Buy” of young people enabled to engage in the world of capitalism by investing in their own home.

But the PM was accused of “selling pipedreams” by housing charity Shelter, which pointed out that even a 95 per cent mortgage will be beyond many people’s range at a time when average house prices are eight times average salaries in England.

The initiative came as the Conservative party opened its virtual annual conference with the announcement that it plans to open a new northern headquarters in Leeds.

Party co-chair Amanda Milling said the new HQ would provide “a base at the heart of the ‘blue wall’” – a description Conservatives are increasingly applying to the so-called red wall of historically safe Labour seats in the midlands and north of England which fell to Tories in the December general election.

Mr Johnson wants to use the four-day conference – moved online after the planned annual gathering in Birmingham was cancelled because of coronavirus – to shift attention away from his government’s handling of the pandemic and onto its plans to “level up” the UK through investment in infrastructure.

He last night announced £3.7bn for the renovation or construction of 25 hospitals.

And he today launched a review of transport links between the four nations of the UK, with a brief to consider proposals for faster road and rail links to Scotland, upgrades to Welsh railways and a possible bridge between Great Britain and Northern Ireland.

The PM was also today holding talks with European Commission president Ursula von der Leyen in the search for a breakthrough in EU trade talks to avert a no-deal Brexit at the end of 2020 which economists believe would inflict massive damage on the UK economy.

Strict minimum capital requirements imposed on UK banks since 2008 have been blamed for making home ownership unattainable for many individuals and couples whose income would allow them to afford repayments on a mortgage but who cannot save enough to put down a five-figure deposit.

Risky lending in the 2000s was blamed for contributing to the collapse of a number of financial institutions which offered mortgages on tiny deposits or even loans larger than the value of the property being purchased.

Partly as a result, the number of households in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017.

Mr Johnson indicated that reforms to stress-tests for mortgage applicants could be used to make homebuying more accessible.

“A huge number of people feel totally excluded from capitalism, from the idea of homeownership, which is so vital for our society,” he told the Telegraph. “And we’re going to fix that – Generation Buy is what we're going for.

“We need mortgages that will help people get on the housing ladder even if they have only a small amount to pay by way of deposit. It could be absolutely revolutionary, particularly for young people.”

But Shelter chief executive Polly Neate responded: “You have to question whether the prime minister is in touch with reality. He is talking about giant mortgages at a time when more than 320,000 private renters have fallen behind on their rent as a result of Covid-19. 

“The prime minister needs to stop selling pipe dreams and start facing reality. The only way we will make a dent in the housing emergency is by increasing the number of secure and genuinely affordable homes, and that means building decent social housing.”     

The PM said that this weekend’s conference represented “a big moment for us, the moment to address some things that the country has needed to fix for generations”.

He has hired Sir Peter Hendy, the chair of Network Rail, to conduct a review of transport links between England, Scotland, Wales and Northern Ireland.

The review will look at air links within the UK, improvements to road and rail links between England and Scotland, cutting rail journey times to north Wales and improving major road links like the A1, A77, A75, A55 and the M4 in Wales.

And it will revive Mr Johnson’s earlier proposal for a road bridge linking Northern Ireland with the British mainland, with Sir Peter asked to “explore the cost, practicality and demand” for a new fixed link. 

Mr Johnson said: “The United Kingdom is the greatest political partnership the world has ever seen, and we need transport links between our nations that are as strong as our historic bonds.

“Quality transport links are the key to making sure everyone can access education, jobs and housing; helping businesses to grow and thrive; and rebalancing opportunity fairly across our country.”