H2B has had only a fleeting impact
The property economist at Capital Economics said the weight of new mortgage regulation, coupled with the rise in house prices it has itself engendered, meant that subsequent first-time buyers are also likely to get less and less help from Help to Buy.
Mortgage Lenders and Administrators statistics provide information on the share of high LTV lending and show the share of regulated loans with an LTV of over 90% had hovered around 2% from 2009 to the end of 2013 when the mortgage guarantee was launched.
It then jumped to 5% in the second quarter of 2014, in line with the rise in take-up of H2B loans as a share of approvals.
But since then, both take-up of the scheme and the share of high LTV loans have dropped back.
Pointon said: “Two developments help explain why H2B only had a fleeting impact. First, government efforts to boost lending to riskier households has run up against efforts by the Bank of England to bolster financial stability by toughening up mortgage regulations.
“Borrowers with small deposits find it harder to pass the affordability and interest rate stress tests introduced as part of the Mortgage Market Review in April of last year.
“Second, by giving a boost to housing demand, and in particular to demand from first-time buyers house prices have gone up – as we and many others warned they would.
“It is difficult to pinpoint the direct effect of the H2B scheme, but figures from the ONS show that homes bought by first-time buyers went up in price by 18% between March 2013 and September 2014 when the popularity of the scheme was growing, compared to a smaller rise of 14% for homemover properties.”
Pointon said the “bottom line” was that since the scheme was launched, the value of a 5% deposit on a typical first-time buyer property has risen by over £1,500.
He added: “Even factoring in the modest rise in loan-to-income ratios, the income required to buy an average first-time buyer house has increased by 12%. That compares to a rise in average earnings of just 1.5% over the same period.
“The Help to Buy scheme was able to temporarily boost the availability of low deposit mortgages, helping a lucky few first-time buyers. But that improvement is proving to be temporary, as the resulting boost to house prices acts to lock other would-be buyers out of the market.”