Industry pundits have expressed scepticism over Boris Johnson’s party conference pledge to introduce long-term 95 per cent loan-to-value mortgages.

The Prime Minister set out the promise in his keynote speech at the Conservative Party’s online conference today.

He said: “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 per cent of the value of the home, vastly reducing the size of the deposit, and giving the chance of home ownership – and all the joy and pride that goes with it – to millions that feel excluded.

“We believe that this policy could create two million more owner occupiers, the biggest expansion of home ownership since the 1980s.

“We will help turn generation rent into generation buy. 

“We will fix the long-term problems of this country not by endlessly expanding the state, but by giving power back to people – the fundamental life-affirming power of home ownership, the power to decide what colour to paint your own front door.

“With our long-term fixed rate mortgages we want to spread that opportunity to every part of the country.”

But, while some property and mortgage experts welcomed the news, others raised serious concerns.

Just Mortgages national operations manager John Phillips says: “The government’s aspiration to get more people on the housing ladder is laudable and something that most people would be in favour of. “However, guaranteeing such mortgages with taxpayer money cannot be the way to go at a time when the national debt is growing by the day. 

“If the government wants lenders to bring back higher LTV mortgages then surely the sensible thing to do is to reintroduce a mortgage indemnity guarantee scheme. 

“These were widespread up until the year 2000. 

“Paid by the borrower, the MIG protected the lender against loss in the event that the borrower stopped paying their mortgage.  

“While some considered it unfair that the borrower paid the insurance premium it did ultimately benefit the borrower as it ensured a large number of high LTV mortgages.”

He adds that state-guaranteed home loans are unsustainable at a time when public borrowing exceeds annual GDP.

Altura Mortgage Finance managing director Rob Gill is also cautious about whether the long-term high LTV mortgages are the right intervention.

He says: “If the job of the authorities is to ‘to take away the punch bowl just as the party gets going’ it must also be to keep the party going if everyone starts reaching for their coats. 

“At the moment higher LTV lending certainly needs some encouragement and the government could play an important role in helping lenders continue to service this important sector of the market. “It will need to be done carefully though and I certainly hope they don’t propose to record everything on an excel spreadsheet.”

Habito vice president of strategy Martijn van der Heijden is somewhat more positive about the scheme, but insists that it needs to be carefully targeted.

He says: “We think the government is right to prioritise young would-be buyers, so we welcome all discussions that put them back on the agenda and take a long term view of the property market’s recovery. 

“The reintroduction of a scheme, such as an improved Mortgage Guarantee Scheme from the government, would support lenders to provide more options for customers with lower deposits and would help to mitigate some of the impact Covid-19 has had on the market and would specifically help first-time buyers.

“The design of the mortgage guarantee would of course be crucial to maximize impact and avoid spillover effects like the house price increase accruing to housebuilders in Help to Buy.

“But I think by ensuring the scheme is open to existing build as well as newbuild, and by targeting a specific group of, for example, first-time buyers under 35 many of these risks can be designed out.”

He says that whatever form the support takes, action is urgently needed to prevent a cliff edge with the scaling back of Help to Buy early next year and the stamp duty holiday ending on March 31.

Meanwhile, estate agency commentators raised concerns that the Johnson’s proposals are focussing on the wrong issue and that increasing the supply of property is the only way out of the housing affordability crisis.

Benham and Reeves director Marc von Grundherr says:  “Creating two million more homeowners is a lovely bit of rhetoric for Boris to fuel market sentiment, but it comes with a clear and obvious problem. Where are they going to live?

“Yes, the affordability of homeownership is a problem at present and providing buyers with a foot up via a smaller deposit will help many to overcome this hurdle. 

“In the more inflated markets such as London, it reduces the deposit required by some £25,000 and so the initial saving is notable.  

“However, we’re simply not building enough homes and the government’s head in the sand approach to this burning issue is going to bring about problems when those securing these new mortgages actually look for a home.

“Unless we address this we will see house prices continue to climb ever higher as a result of this new initiative, to the detriment of those it’s ironically supposed to help.”

Barrows and Forrester managing director James Forrester agrees.

He adds: “Today’s announcement will no doubt excite a nation of aspirational homebuyers who have already been sent into a frenzy over the prospect of paying no stamp duty.

“However, for Boris Johnson to claim this will help fix our broken housing market is not only laughable but quite frankly an insult to those who find themselves priced out of homeownership.

“The cause of the dire situation we find ourselves in is the government’s sustained failure to build enough affordable housing year in, year out.  

“The inadequate supply of housing to meet demand is one of the driving factors that has caused house prices to spiral and to continue to mask this failure by further fueling demand is irresponsible.

“Instead, their time would be better spent reallocating wrongly classified green belt land so it can be utilised for housing and preventing the big housebuilders from drip-feeding housing supply in order to keep their profits up.”