Shares in UK housebuilders rallied on 5 October following reports that the Government wants first-time buyers to be able to take out long-term fixed-rate mortgages with just a 5% deposit under a scheme referred to as ‘Generation buy’. This could potentially act as another tailwind for the property sector.

In an interview with The Telegraph, prime minister Boris Johnson said he had a solution to the problem of unaffordable property deposits. This might involve banks dropping stress tests on some applicants.

‘It is understood that the Government could also accept some of the risk through a form of state guarantee to give lenders additional confidence,’ The Telegraph said.

Most lenders have withdrawn their low-deposit mortgage offerings for fear of taking on too much risk but the Government is concerned that when the stamp duty holiday ends in March 2021 the housing market will grind to a halt once again.

The Nationwide home price index increased by 5% on an annual basis in September, marking an acceleration from August’s 3.7% growth rate and the biggest jump since September 2016, as the housing market recovery continues to defy the sceptics.

As well as an increase in prices, mortgage approvals are climbing. Approvals in August were almost 85,000, the highest since 2007 and well above the monthly average of 66,000 over the last few years.

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