Help to Buy 2 props up 95pc lending
In Q1 2014 lending at 90% to 95% LTV amounted to 1.46bn, of which £827m to £873m was from Help to Buy 2, meaning that without the scheme the total would be between £585m and £631m.
In the thick of the recession between 2009 and 2012 the quarterly average was £587m.
Despite the figure rising in recent years lending is still 80% lower than seven years ago.
The Help to Buy mortgage guarantee was responsible for 2.7% of all mortgage transactions in the first quarter of 2014.
Simon Crone, Vice-President of mortgage insurance Europe at Genworth, said: “It is clear the 95% LTV market would still be significantly depressed without Help to Buy 2.
“Loans with a 5% deposit were first-time buyers’ staple diet from the 1980s to the early 2000s.
“But even with Help to Buy 2 in place, there is still a yawning gap to close before we reach a stable middle ground between the previous lending peak and the drought that followed during the recession.
“Downsizing Help to Buy runs the risk of throwing the recovery into reverse and its winding down in 2016 may negatively impact activity.”
Properties purchases using the scheme are far cheaper than the market average, especially in London, the South East and East Anglia, suggesting Help to Buy does not have a primary role in driving the UK’s house price growth.
Governor of the Bank of England Mark Carney recently warned against loans at 4.5x or 5x borrowers’ income, yet using the scheme two thirds of privately guaranteed loans have a loan to income multiple of 3x or less while none were above 4x loan.
Simon Crone added: “An exit strategy is needed well in advance to avoid this scenario and improve the long-term prospects of first-time buyers.
“The OECD recently judged that shifting Canada’s own state-run scheme to the private sector would strengthen the country’s financial stability.
“A similar long-term solution could undoubtedly benefit the UK and remove the reliance on taxpayer funds.
“A transition for Help to Buy to the private sector could not only improve on the limited cover and flexibility of the government guarantee, but also use private capital to remove any reliance on government funding.”