October 18, 2013

Brian Murphy is head of lending at Mortgage Advice Bureau


With the Royal Bank of Scotland reporting a deluge of calls from buyers-in-waiting when its Help to Buy 2 products launched last Tuesday, the debate about the rights and wrongs of the scheme’s early arrival may soon be swept away by a consumer stampede.

It may prove to be a blessing that lenders’ opening offers have not caused even more of a stir by trumping every existing market rate. A key factor in the scheme’s success will be successfully managing demand, but while cynics have denounced its early launch as political point-scoring, no-one can be left in any doubt that the appetite exists for greater access to genuine 95% mortgages.

For too long aspiring homeowners have been handicapped because they cannot save the requisite deposit. Help to Buy 2 has a particular appeal to first time buyers and first time sellers, but the usual rules on affordability have not been forgotten and lenders will not give out loans to those who cannot realistically afford the monthly repayments. There’s no reason to suggest that the availability of 95% mortgages will lead to greater arrears or repossessions – and there is every chance that the housing production line will get a further boost with consumers so clearly in favour of home ownership.

The recession has failed to dampen the UK’s property aspirations, and recent research by Mortgage Advice Bureau showed that two thirds of young adults plan to buy or move house during the lifetime of Help to Buy. Just 1% of 18-24s feel that owning their home has no importance to their lives.

House price indices have sparked heated debate in recent months but for most of the country any growth that has emerged to date has been from a very low base. Average UK house prices still remain 14% lower than their peak in August 2007, according to the latest Halifax data. London house prices are racing ahead, but as a region where the property market never felt the full effects of the recession, it’s ill-advised to take the capital as a marker for the rest of the country.

The Bank of England’s Financial Policy Committee is clearly watching the market’s trajectory and is ready to act if necessary. Help to Buy was only ever intended to be a temporary measure: if we suddenly step into a danger zone, there is nothing to stop the scheme from being fine-tuned.

In the meantime, confidence is steadily returning among consumers, lenders and builders – an essential prerequisite in the long term for a healthy housing market with affordable mortgage products. Success for Help to Buy 2 will mean the permanent restoration of 95% lending and we can look forward to increasingly appealing offers in this bracket.


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