Apropos slams Prime Minister’s 95% LTV proposal

Boris Johnson’s proposal of introducing a 5% deposit mortgage scheme where normal stress test rules don’t apply could result in people acquiring unsustainable debt.

That was the view of David Alexander, joint managing director of Apropos, the property management company.

Alexander said: “The proposal by the Prime Minister to offer a 5% deposit mortgage scheme for first-time buyers to “fix our broken housing market” sounds superficially appealing but ultimately does not bear much scrutiny.

“Offering mortgages to individuals which lenders already regard as high risk has the potential to land people with future negative equity.

“No-one would doubt that the intention is well meant but the execution could result in many individuals acquiring unwanted and unsustainable debt in the years to come.”

He added: “Following the financial crash of 2008 additional stress tests and financial limits for mortgage approvals were introduced precisely to avoid another boom and bust in the housing market.

“This policy would appear to reverse this precautionary approach and introduce high value mortgages with little equity to support them.

“Even a slight dip in the market could result in negative values for many thrusting them into a difficult financial position.”

Some were more positive about the potential scheme.

Mark Hayward, chief executive of NAEA Propertymark, said: “We welcome the Prime Minister’s comments today which shows a positive change in tone by promoting a generation of renters to become a generation of buyers.

“We encourage lenders to come on board and support this initiative to enable first time buyers to enter the property market by future proofing the financial burden many face.”

“We want to see intent become action quickly so that first time buyers can make the most of the current stamp duty holiday and continue to stimulate the housing market.”