'Give young state loans for deposits'

Young people who are struggling to buy their first home should be given student-loan style help by the government for the deposit, a thinktank has said.

The Housing and Finance Institute (HFI) put forward several initiatives to increase the number of homeowners by one million by 2035.

The organisation has suggested that the government cover the cost of a deposit, much like the student loan system.

As with the current system of student loans, the HFI suggests the loans could be repaid as a proportion of salary once the recipient has reached a certain income threshold.

The loans would be written off after 40 years or at state retirement age, whichever comes first.

Alternatively, they could defer final repayment until they sold their property.

The scheme is part of a package of measures put forward by the HFI to help more people buy a home.

It has also suggested that stamp duty should be paid upon the sale of a property rather than the purchase, and a housing allowance tax scheme should be set up under which mortgage interest for young homeowners is deducted from their tax.

The organisation points out that there had been a 20% fall in homeownership among the under 45s in the past 15 years, with overall homeownership levels falling back to where they had been in 1985.

It says urgent action is needed to boost home ownership, as evidence mounts that a good and stable family home has beneficial effects on people’s health, their sense of economic stability, and children’s educational attainment.

Natalie Elphicke, chief executive of the HFI and a former adviser to the government on housing, said: “The 15-year experiment of expanding the private rented sector on a huge scale has failed.

“It has left too many people facing exorbitant rents for poor-quality homes, with severe detrimental effects on their living standards and future opportunities. The evidence is compelling.

“It is time for a rethink.”

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