Any mortgage rule changes ‘must deliver good outcomes for customers’

Careful consideration is needed to make sure any changes to mortgage lending rules deliver good outcomes for borrowers in the long term, according to a body representing financial firms.

Downing Street has said there will be a mortgage review, looking at how low-deposit mortgages could be extended under plans to help people on to the property ladder.

The Prime Minister’s official spokesman said: “We want to look at access to low-deposit mortgages and what our mortgage industry can learn from others around the world.”

He said the review into ways to “extend low-deposit mortgages and create a greater market for them” will start in the coming weeks and report back in the autumn.

Discussing plans to allow housing benefits to contribute towards mortgages, he said: “The bill for housing support is around £30 billion a year and it could reach £50 billion by 2050 if we don’t take action.

“That’s money currently going to private landlords or housing associations so we’re looking to change the rules so, rather than taxpayers’ money going to private landlords. those on housing benefits can spend their benefit on rent or towards a mortgage either for full or shared ownership.”

He could not say how many people the changes will assist.

Charles Roe, director of mortgages at trade association UK Finance, said: “The mortgage industry recognises the importance of home-ownership and today’s announcements by the Prime Minister could help more people realise their dream of owning their own home.

“Firms are committed to lending responsibly, with regulatory rules in place to ensure that mortgages are affordable – it will be important to carefully consider any changes to ensure they deliver good outcomes for customers throughout the life of the mortgage.

“We look forward to discussing the proposals and will continue working closely with the Government to help more people get on to the housing ladder.”

Downing Street said the move to allow housing benefits to pay for mortgages would effectively discount savings into Isas from the Universal Credit eligibility rules.

An extension of the Right to Buy for housing association tenants is also expected.

Housing Secretary Michael Gove has said the Government would ensure a like-for-like replacement for any social housing sold to tenants under the extension of Right to Buy.

But Polly Neate, chief executive of Shelter, said: “The Prime Minister’s housing plans are baffling, unworkable, and a dangerous gimmick.

“Hatching reckless plans to extend Right to Buy will put our rapidly shrinking supply of social homes at even greater risk.

“For decades the promise to replace every social home sold off through Right to Buy has flopped. If these plans progress, we will remain stuck in the same destructive cycle of selling off and knocking down thousands more social homes than get built each year.

“The maths doesn’t add up: why try to sell off what little truly affordable housing is left – at great expense – when homelessness is rising and over a million households are stuck on the waiting list?

“The Government needs to stop wasting time on the failed policies of the past and start building more of the secure social homes this country actually needs.”

James Andrews, a personal finance expert at Money.co.uk, said: “Boris Johnson is unashamedly dipping into Margaret Thatcher’s ‘greatest hits’ catalogue to shore up backbench support following this week’s damaging no-confidence vote.”