Boris Johnson Vows to Get U.K. Back to Normal Next Year

(Bloomberg) -- U.K. Prime Minister Boris Johnson promised more generous home loans for millions of young first-time buyers as he vowed to use the coronavirus crisis as an opportunity to reshape the economy for the better.

The premier said his government is working to get the country “back to normal” by this time next year after the pandemic disrupted daily life and stalled the economy.

Speaking to his Conservative Party’s annual conference, being held online this year, Johnson set out his key policy priorities, including a new pledge for young, first-time buyers to be able to access 95% loan to value mortgages.

“We will help turn generation rent into generation buy,” he said. “We believe this policy could create 2 million more owner occupiers.”

Johnson’s speech was a key chance for him to reset his government’s agenda after months of growing criticism over his handling of the pandemic. He said he believes “normal” life will be back within a year, in time for the party’s conference in October 2021.

Alien Invaders

“Your government is working night and day to repel this virus and we will succeed just as this country has seen off every alien invader for the last thousand years,” Johnson said. “The next time we meet it will be face to face, cheek by jowl.”

The premier said the government will use the crisis to overhaul the economy and level up opportunity. “After all we’ve been through, it isn’t enough just to go back to normal. We’ve lost too much. We’ve mourned too many.”

Policies he outlined included:

• Long term fixed mortgages of as much as 95% loan to value for young, first time buyers
• A major investment in green energy to make the U.K. a global leader in wind power
• Reforming care home funding
• Intensive one-to-one teaching for children

Johnson made little comment on Brexit, even though the U.K. is due to quit the EU’s single market and customs union at year-end and a trade agreement with the bloc is in the balance. He said the divorce will bring an “excitement and verve” to Britain when it is able to sign new trade accords and control its laws and borders, but the subject only got a brief mention in the 27-minute speech.

Soaring Prices

Johnson’s housing announcement comes against the backdrop of soaring prices over the last two decades which have left millions of young people unable to afford a home. The situation has been made worse by the pandemic as banks pull loans requiring the smallest deposits because of concerns about the economic outlook.

Since February, the average interest rate on a mortgage covering 95% of the value of a home has jumped by almost a percentage point to 3.9%, according to the Bank of England. In 2004, around 60% of 25-34-year-olds owned their homes. By last year, the figure had fallen to around 40%, making the housing crisis a key political issue for all parties.

“The government has again signaled that it believes the housing market will play a central role in driving the wider economic recovery,” said Tom Bill, head of U.K. residential research at broker Knight Frank. “95% loan-to-value mortgages have practically disappeared from the market in recent weeks as lenders become more nervous.”

Banks “support innovation in the mortgage market, particularly that which enables borrowers to realise their dream of home ownership,” said Eric Leenders, managing director of personal finance at trade body UK Finance, while noting firms have a duty to lend responsibly.

With lenders currently facing regulatory restrictions on the amount of low-deposit mortgages they can make, some questioned the feasibility of the pledge.

“I’m not sure banks are going to be keen to lend in scale at a 95% loan to value,” said Nigel Terrington, chief executive officer of Paragon Banking Group Plc. “I don’t see how this can work without an overhaul of conduct regulations, as well as some form of government guarantee.”

War or Disaster

Elsewhere in his remarks, Johnson denied reports he is physically unwell after contracting Covid-19 in March and insisted he takes no pleasure in curtailing liberty or making huge state interventions in the economy.

“Rishi Sunak, the Chancellor, has come up with some brilliant expedients to help business to protect jobs and livelihoods -- but let’s face it, he has done things that no Conservative chancellor would have wanted to do except in times of war or disaster,” Johnson said.

“This government has been forced by the pandemic into erosions of liberty that we deeply regret, and to an expansion of the role of the state – from lockdown enforcement to the many bail-outs and subsidies – that go against our instincts, but we accept them because there is simply no reasonable alternative.”

Johnson also said he wants to boost the U.K.’s economic growth and productivity, which he said had been let down by a lack of investment in skills and infrastructure. He reiterated the party’s manifesto pledges to build more hospitals and tackle crime, and stressed it is the role of the private sector, not the state, to lead Britain’s economic recovery.

©2020 Bloomberg L.P.