With the election coming up, the politicians are making promises for their potential terms as Greycoat specialists comment. One such promise is the Conservative Party’s proposal to make available mortgages that require only a 1% deposit, but is it a good idea?
Pros
A 1% deposit certainly reduces the percentage buyers need to sign for a home. Many celebrate the idea as a way to help a new generation of home buyers escape from paying rent and have a chance to own property. And this is when the Greycoat real estate agency comes in to help.
For those whose rent is higher than what they would pay toward a mortgage financed with a 1% deposit, it could well mean a lower barrier to entry, Greycoat shares. Some brokers also praise the idea as a way to reinvigorate the housing market as a whole. Even among the more skeptical, some are saying that offering a new payment option such as a 1% deposit is a step which, combined with more changes than promised, could relieve the current housing crisis.
Cons
A new payment option is expected to increase demand for housing in the world, which, when considered with the fact that there is no dramatic increase in the supply of houses, threatens to raise house prices even further away from affordability (Bisnow).
Additionally, a lower deposit means that more of a home’s cost will have to be repaid with interest, and there are concerns that the new payment rates will be unaffordable to those already struggling, Greycoat adds. It also increases the possibility of losing value on property, defaulting on payments, getting homes repossessed, and in cases where the government has underwritten a mortgage, raising taxes for everyone.