After returning from a much-needed holiday, I was feeling refreshed and optimistic about tackling the second half of the year. However, that mood quickly shifted when I heard about a proposed solution to the property crisis during Thursday morning’s news. It seems that some Ministers believe 40-year mortgages could be the answer to helping first-time buyers secure a property, drawing inspiration from the Netherlands and Denmark where such deals are common.
While 40-year mortgages may seem like a good idea at first glance, they might not be the silver bullet we hope for. Yes, they could reduce monthly outgoings for younger individuals, precisely when they have limited income and assets. However, we must be cautious as enabling more people to buy property at a lower initial cost may eventually fuel property inflation, negating the initial benefits.
The current state of the property market has roots going back decades and involves various factors such as high land values, population growth, immigration, foreign purchasing, a lack of new builds, the rise of single-occupant households, the concentration of wealth in London, and the Southeast, holiday homeownership, buy-to-let, and the sale of council houses, among others.
Property prices are soaring to almost all-time highs, accompanied by interest rates not seen for over a decade, with no signs of imminent reduction. Rents have also reached record levels, particularly burdening the younger generation who longingly look at their parents and grandparents who purchased property many years ago.
Housing has traditionally been governed by the free market with minimal government interference, save for some incentive schemes like stamp duty relief and help-to-buy, which have arguably exacerbated the problem.
The Government, realising the significance of housing to the electorate, is desperately seeking ways to revitalise building and property sales. However, promoting a 40-year mortgage might not be enough, and better ideas are required to address the crisis effectively.
Failing to tackle the housing crisis could spell trouble for the Conservatives, an ironic twist for the party that has long championed home ownership. As the stakes grow higher, the need for innovative solutions becomes paramount.