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Young homebuyers should get loans for deposit to get on the property ladder

The government should give first time buyers loans for their deposit to buy their homes to create a culture of home ownership.

An idea from the Housing & Finance Institute (HFI) says the government should give young first time buyers a loan for their deposit to help them get on the property ladder.

The report claims over the past 15 years private rented sector homes are damaging family life and changing to a culture of home ownership will creating an environment of security and opportunity.

According to the HFI there has been 2.4 million fewer households in owner occupation and social rent with 6 million fewer people accessing a stable home.

The number of people living in a stable home has fallen below 80% of all households and this should be increased to 90% by no later than 2035.

More government home ownership support

The report recommends the government should significantly extend home ownership support once the current Help to Buy scheme ends in 2021.

Some 150,000 homeowners have benefitted from Help to Buy that offers first time buyers an interest free loan equal up to 20% of the property value available on new build properties.

The equity loan scheme requires you to have a 5% deposit and the remaining 75% is provided by a mortgage from a lender for properties valued up to £600,000.

A range of different schemes has been proposed by HFI such as a government loan of 10% for the deposit which could be repaid as a proportion of their earnings subject to a minimum income amount.

Also, a housing allowance tax scheme could deduct mortgage interest from an individual's tax and stamp duty could be paid on sale rather than purchase as well as being free at the end, helping older people to downsize.

For older homeowners the equity release buyer can avoid downsizing and access wealth in their property with a lifetime mortgage to gift a child or grandchild the deposit on their first home.

Home ownership falls by 20 per cent

The impact of the mortgage affordability test and struggle to raise a deposit means the number of first time buyers entering home ownership last year were 270,000 less than two decades earlier, says HFI.

The decline in home ownership has affected the 25-34 and 35-44 age groups with falls of 20% in the past 15 years.

For those in the older age group started in private rent when they were young and remained as they themselves grew older over this period.

With competition from buy-to-let investors and reduced supply of suitable properties, prospective home buyers must continue renting and saving for a bigger deposit.

Home ownership has allowed remortgage buyers and home movers to accumulated large amounts of equity in their properties, giving them a stable housing environment.

Those aged 16-34 face a triple difficulty in that they have less access to social housing, less access to home ownership and are paying 38% of their income on rent, the highest proportion for any group.

The report says the government should prioritise more substantial support for the stable tenures of home ownership and social housing rather than private renting.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or a buy-to-let investor.

Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage or reduce inheritance tax owed by your beneficiaries.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.


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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

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