Zoopla: ‘The best first-time buyer policy is to build more homes’

Building more homes is a better solution than mortgage schemes to support first-time buyers, a Zoopla executive has claimed.

Richard Donnell, executive director at the portal, has suggested there are challenges to reported schemes being planned by the Government to support first-time buyers.

These include introducing 25-year term mortgages or 1% deposit home loans.

Donnell said: "The days of first-time buyers taking on large mortgages, stretching themselves and hoping it turns out alright are well and truly over. 

“Proposed policies like long-term mortgage rates fixed for up to 25 years are beneficial as they could negate the need to test the affordability of a buyer at a higher mortgage rate - however, the reality is that the long-term mortgage market in the UK is not developed. To get a scheme like this up and running would require more government support to kickstart it, or innovation from banks who decide to trial it.”

Addressing rumours about the introduction of 1% deposit mortgages, he warned there would be affordability issues for buyers.

Donnell said: “A definite positive is that they get around the deposit challenge for first-time buyers - however, this is only part of the problem as affordability testing will still likely apply, even with an insurance policy to protect the bank from house price falls. In London for example, a household income of over £150,00 would be needed to afford a London home with a 5% and pass the affordability test. 

“As it stands, building more homes for sale and rent is the best solution to keep prices and rents in check. This in itself helps first-time buyers save for a deposit while improving the choice for all."

Donnell’s commentary also revealed that renters would pay lower mortgage rates in all areas of the UK compared with rent if they purchased their rental property. In the North East, the mortgage would be a third lower than the rent.