Boris' attempt to revive Margaret Thatcher's "right to buy" policy

A mortgage guarantee scheme to help buyers buy their first property with only a 5% deposit - the proposed scheme is expected to be announced on the 3rd of March. Following the laws of supply and demand, if more properties become available on the market, the prices should theoretically go down as there is an abundance of homes, however, it was not the case before and throughout the pandemic.

Boris Johnson vowed to help the younger generation of renters switch to a generation of homeowners. His quote:

“Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder”.

Such a political move may be explained by a recent increase in overall debt in the UK. The national debt has been pushed to a record high of £2.13 trillion, where coronavirus had attributed to additional borrowing of £271bn this financial year. By encouraging people to get involved within the mortgage market, the government aims to provide additional support to the budget and aggregate spending in the UK. In addition, this policy with the extension of the stamp duty holiday may only aid house inflation which in turn would also benefit existing owners.

As a reminder, the supply of new housing remains below the required level and it is unlikely to increase dramatically during the rest of the lockdown. Most likely, the mortgage lenders would be given a government-backed guarantee on a slice of these risker LTV mortgages, essentially creating the entrance for the treasury into the housing market and exposing its behaviour.

Margaret Thatcher after handing over the deeds of the house to the Pattersons of Harold Hill, Essex in 1980. Photograph: PA Archives

In my opinion, the PM’s move resembles the Margaret Thatcher’s “1980 Housing Act” where the “right-to-buy” scheme and purchasing your council property was relatively a successful move to generate some revenue for the government and allow a new generation of people to buy their first homes. Furthermore, the policy also won the hearts of existent landlords who managed to expand their portfolio of properties. Nevertheless, like in the present, the government failed to build more properties from the generated income or rather, the construction specifically was kept lower to sustain the demand, thus adding extra inflation to the properties.

All in all, the opportunity is not to be missed! If you are a landlord who is in a need of an extra deposit - Wectory is here for you 😉

1. https://uk.news.yahoo.com/u-k-guarantee-mortgages-help-161236297.html
2. Tackling the under-supply of housing in England - House of Commons Library (parliament.uk)
3. UK government debt and deficit - Office for National Statistics (ons.gov.uk)
4. The right to buy: the housing crisis that Thatcher built | Social housing | The Guardian