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Government’s Potential 1% Mortgage Deposit Scheme Sparks Debate Among Industry Experts

Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are contemplating a groundbreaking scheme to facilitate homeownership for first-time buyers through a mortgage requiring a mere 1% deposit has ignited a fervent debate among property and financial connoisseurs.

The Independent broke the news over the weekend, highlighting the government’s intention to boost homeownership among first-time buyers, particularly younger voters, by backing mortgages under this ambitious scheme.

Ying Tan, Chief Executive of Habito, acknowledged the appeal of the scheme, stating, “This news will certainly grab the headlines and entice younger voters to support the Government. At first glance, this is great news. In principle, the more help we can get for first-time buyers, the better.” However, Tan expressed reservations about the practicality of the scheme, emphasizing concerns over mortgage affordability and the potential for unintended consequences, such as inflating a housing bubble.

Mark Harris, Chief Executive of broker SPF Private Clients, took a more nuanced stance, suggesting that 99% mortgages could be beneficial under the right conditions. Harris pointed out the challenges of saving for a deposit while renting and cited existing mortgage products that provide similar high LTV solutions. He acknowledged that while the scheme could increase housing demand, it also comes with rigorous affordability assessments to mitigate risks.

David Hannah, Group Chairman of Cornerstone Tax, criticized the scheme as a superficial intervention by the government, arguing that encouraging burdensome debts for first-time buyers does not address the fundamental issues plaguing the UK housing market.

Charlie Lamdin, Founder of BestAgent and Presenter of Moving Home with Charlie, used a striking analogy on X, formerly known as Twitter, to express his concerns. Lamdin warned that the scheme could artificially inflate the housing market, potentially setting the stage for a significant market correction.

In contrast, Lewis Shaw, Mortgage Expert and owner of Shaw Financial Services, presented a cautiously optimistic view. Shaw highlighted the societal benefits of homeownership and suggested that the scheme, if carefully structured and targeted exclusively at first-time buyers, could offer a much-needed boost to homeownership rates. He acknowledged the risks but advocated for the potential positive impact of the scheme on the housing market dynamics.

This array of perspectives underscores the complexity and potential ramifications of the government’s proposed 1% mortgage deposit scheme, reflecting a spectrum of insights from industry insiders on its viability and impact on the UK housing market.