95% mortgage plan under strong attack

Boris Johnson’s suggested return to 95% mortgages for first time buyers has come under strong attack from economist Josh Ryan-Collins.

Head of Finance and Macroeconomics at University College London, Mr Collins believes that the introduction of such mortgages will bring about ‘inevitable house price inflation’.

Affordability problems

He said: “To say we have been here before would be an understatement of epic proportions. Since the days of Margaret Thatcher, every UK government has sought to cut through the housing affordability problem with the easy and politically popular option of subsidising the demand for homeownership.

“Generally, this has taken the form of liberalising mortgage regulation or providing direct government subsidies for first-time buyers, most recently the various help-to-buy schemes.

All have failed to bring down the price of homes.”


In a speech to the Conservatives’ online annual conference the Prime Minister promised to turn Generation Rent into Generation Buy by re-introducing 95% mortgages for first-time buyers.

He claimed there are ‘up to two million people’ who could afford mortgage repayments but could not get a loan because of the size of the required deposit.


Figures produced by Halifax at the same time showed house prices soaring by 7.3% with mortgage applications hitting a 12 year high. The average price of a home is now £249,870.

Managing director Russell Galley said: “Across the last three months, we have received more mortgage applications from both first time buyers and homemovers than any time since 2008.

Housing supply

Mr Ryan-Collins maintains that making mortgages more affordable for first time buyers can only lead to higher prices because of the limited supply of homes in the UK market.

He said the Prime Minister ‘may not be aware’ of the fact that there were quite a few 95% mortgages around leading up to the housing bubble that precipitated the UK’s 2007-09 banking crisis.


“The resulting economic catastrophe led to them being phased out,” he said.

He added: “The UK remains locked in a self-defeating “doom loop”: falling levels of homeownership lead governments to loosen mortgage regulation, resulting in increasing household debt and house prices, leading to a housing bubble and eventually a financial crisis, leading to stricter mortgage regulation, which is then blamed for falling homeownership and so on.”