Give 100% mortgages to first-time buyers who have been good renters, Gerard Lyons says

Reform of the mortgage market is needed to turn ‘generation rent’ into ‘generation buy’, a leading economist says.

Gerard Lyons, economic adviser to Boris Johnson during his time as London mayor, urged the next Prime Minister to tackle obstacles preventing young people buying homes.

One idea is to back 100 per cent mortgages, where banks lend the entire value of the property, to first-time buyers who have been exemplary renters.

More help needed? Gerard Lyon believes addressing the housing crisis should be a central feature of economic policy

It comes after the Government vowed in June to examine the mortgage market in a review Lyons said could be ‘transformational’. 

In a paper for The Policy Exchange thinktank he said: ‘Addressing the housing crisis should be a central feature of economic policy over the remainder of this Parliament and into the next.’

He claimed his suggestions could help up to 3million first-time buyers bag a home, as the number of households who rent has jumped from 2.8million to 4.5million over the past decade.

And while mortgage owners spend around 18 per cent of their income on repaying their debt, social and private renters are paying out 27 per cent and 31 per cent of income respectively on rent. 

Lyons said there was room to ease restrictions brought in since the financial crisis. 

One was a cap on the number of high loan-to-income mortgages, handed to buyers whose wages were small compared to the value of their house, which a lender could issue.

This could be toned down without a build-up of risks. Longer-term fixed-rate mortgages lasting 20 years or more should also be more prevalent. 

And people who have always paid rent on time, but don’t have enough for a deposit, should get access to mortgages – in some cases a bank lending the entire property price.