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What is Generation Buy?

The Prime Minister has made a bold statement with his plans to turn Generation Rent into Generation Buy — but what does it mean for you?

Changes to the property market are making headlines again — but this time it’s “Generation Buy” that’s making a splash. It’s already been a busy year — from lockdown to the stamp duty holiday to the huge surge in demand to mortgage requirements changing on an almost day-to-day basis. So if you’re having trouble keeping up, you’re not alone.

Now, Boris Johnson has announced plans to “change Generation Rent into Generation Buy”. But what does “Generation Buy” actually mean? And does that mean any changes right now? Well, when it comes to the property market there’s no magic switch, so we’ll talk you through what the announcement means at the moment.

What is Generation Buy?

“Generation Buy” was introduced by the Prime Minister at this year’s Conservative Conference. Because so many young people have had trouble getting on the property ladder, the media has long since dubbed them “Generation Rent” — and the plan is to turn those renters into buyers. This would, in theory, happen with more mortgage offerings for 5% deposits and an increase in building new homes.  

“We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 percent of the value of the home - vastly reducing the size of the deposit,” the Prime Minister explained. “We believe that this policy could create two million more owner-occupiers - the biggest expansion of home ownership since the 1980s.”

The Prime Minister laid out a couple of ideas for how to make this happen, but concrete next steps were thin on the ground."

What does it mean for me?

Right now, maybe not much. Although the Prime Minister’s promise has been making headlines, right now it’s just that — a promise. And how much weight you put on political promises is up to you, but many will be waiting to see if it turns into real action.

He laid out a couple of ideas for how to make this happen — like building more homes and the option of 5% deposits — but concrete next steps were thin on the ground, so make sure to see past the headlines. 

Possible downsides

It’s also important to note that this announcement was not welcomed by everyone. Low deposit mortgages are complicated. We’ve recently 10% mortgages being pulled off the market to deal with increased demand — when lenders are overwhelmed, that’s one way they can control how many mortgages they’re approving.

A 5% deposit option could lead to a surge in interest that they can’t keep up with, with some people left out in the cold. In fact, it could just lead to an increase that will push prices up for everyone.

Larger Concerns

But perhaps the bigger issue is that a 5% deposit is considered controversial to some economists and theorists. Many have pointed out that this type of lending could be seen as similar to what happened before the 2008 crash. 

“A move to 5 per cent deposits is likely to require change to regulations introduced in the wake of the 2008 crash to take risk out of the financial system,” The Independent explains.

“... Risky lending in the 2000s was blamed for contributing to the collapse of a number of financial institutions that offered mortgages on tiny deposits or even loans larger than the value of the property being purchased.”

There is no doubt that there needs to be a solution to the lack of homeownership — rates have plummeted in recent years, especially among the under 40s. But some worry a change in deposit requirements won’t change the underlying affordability issue — that property prices have risen at a much, much higher rate than salaries and many are struggling to find a property they can afford. 

So what does it all mean? Generation Buy is a bold term and a big promise, but if you want to see if it turns into any action — or the right kind of action — you’ll have to wait and see.

Ready to buy? At the moment, you can still benefit from the stamp duty holiday (or check out our guide for first-time buyers, if you’re looking to try to take that first step).