99% Mortgages May Inflate House Prices in Kidderminster Unless Supply Increases

Reports from The Independent suggest the UK Government is considering a 1% deposit mortgage scheme in the March 2024 Budget. While this may help those struggling to buy homes, the housing sector warns of potential price increases if more stock is not made available.

Housing Plan Needs Progress

A July 2023 report by the Commons Housing Committee found the UK Government unlikely to meet its goal of delivering 300,000 new homes annually by the mid-2020s. In the year to March 2023, only 210,320 dwellings were completed. Michael Gove MP, Secretary of State for Levelling Up, Housing, and Communities, launched a long-term housing plan in July 2023, promising to build on underused sites, clear planning bottlenecks, and regenerate 20 towns and cities, including Kidderminster.

Planning Policy is Crucial

There have been calls for reforms to simplify the planning system to speed up homebuilding. New laws, effective from 26 October 2023, aim to speed up planning, hold developers accountable, reduce bureaucracy, and encourage councils to enable new home building. In December 2023, Michael Gove announced an updated National Planning Policy Framework, expecting every local authority to have up-to-date 5-year plans, though homebuilding targets are not mandatory.

Experts Urge Caution

Introducing easy access to mortgage lending without increasing housing supply may drive up prices, leaving aspiring homeowners unable to afford monthly repayments even with a deposit. There are concerns that this could lead to a housing bubble, with young buyers taking on large debts that become unaffordable. If the UK Government succeeds in addressing housing undersupply, leading to lower house prices, people may fall into negative equity.

Potential New Scheme

Ministers may draw on recent schemes like Help to Buy, which offered 20% equity loans and backed 5% deposits for new-build developments. The mortgage guarantee scheme, set to run until 2025, aims to boost 5% deposit deals by compensating lenders if a home must be repossessed. These schemes provide templates for new initiatives but must address supply issues to avoid inflating prices in Kidderminster and beyond.