Housebuilding stocks leap on Boris Johnson's plan for 5% deposit mortgages

Shares in Britain’s biggest housebuilding firms leapt on Monday, as investors welcomed a new UK government plan to help more young people buy their own homes.

Prime minister Boris Johnson said over the weekend the government will “fix” the challenges many aspiring homeowners face in trying to buy a place of their own.

Johnson said the government would encourage more banks to offer mortgages to buyers who can only afford to put up 5% of the value of properties as a deposit.

He told the Telegraph he wanted to create “Generation Buy” among young people, and is reported to have told ministers to draw up measures to boost the availability of such low-deposit loans.

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Many banks have reined in such lending since the coronavirus hit, with more caution triggered by the economic crisis and fears over new customers’ ability to repay loans. Banks have also been prioritising supporting existing customers, including handling mortgage holidays.

Details remain scarce on the plans and banks may resist pressure to loosen borrowing restrictions further, but the comments sent leading housebuilding and property stocks higher as markets opened on Monday.

Investors appeared encouraged new measures could prove substantial enough to boost demand for new homes. Four of the biggest listed housebuilders were among the fastest-rising companies on the FTSE 100 (^FTSE) in mid-afternoon trading on the stock exchange in London.

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Barratt Developments (BDEV.L) was trading 5.4% higher, Persimmon (PSN.L) was up 4.3%, and Taylor Wimpey (TW.L) and Berkeley Group (BKG.L) were up 2.4%. Shares in property listings site Rightmove (RMV.L) were also up 3.3%.

Meanwhile Vistry Group (VTY.L), previously known as Bovis Homes, saw some of the biggest daily gains on the mid-cap FTSE 250 (^FTMC) index, trading 4.9% higher.

"Mr Johnson clearly wants to assist younger people get on the property ladder, and the story has boosted the likes of Barratt Developments, Persimmon and Vistry Group PLC," said David Madden, a market analyst at CMC Markets UK.

Joshua Mahony, senior market analyst at IG, said the promises had given housebuilders a “welcome leg up” to housebuilding stocks. “From a housebuilder perspective, the constant support shown by this government will highlight the expectation that housing demand will remain strong through a bottleneck of Brexit and Covid factors.”

Ministers are reported to be considering significant new government guarantees for buyers, as under the Help to Buy scheme. Such measures could prove popular but also controversial, fueling further market growth while shifting the risk from banks and borrowers to the taxpayer amid rising economic uncertainty.

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