Help to Buy could backfire
Peter Williams is executive director of the Intermediary Mortgage Lenders Association
Although July’s residential market survey from RICS credits government measures with encouraging the pickup in activity, the latest house price index from ONS – showing the annual growth rate increasing from 2.9% to 3.1% in the space of a month – is a subtle warning about the potential long-term impact of these incentives.
The increasing growth rate of house prices still needs to prompt house builders into greater action if we are to avoid a growing demand and supply mismatch.
The market is enjoying better pricing and product availability, but perhaps the biggest benefit of the Funding for Lending Scheme (FLS) has been the positive impact on consumer interest, spurred on by Help to Buy.
Even so, the ONS findings show the on-going challenge for first-time buyers, who are on average paying 3.9% higher than this time last year, compared with a 2.7% increase for owner occupiers.
There is a lot resting on the shoulders of the Help to Buy mortgage guarantee to improve access for people with low deposits.
Having opted for short-term counter-cyclical incentives to push the market towards further growth, the key issue now is improving supply otherwise the initiative runs the risk of backfiring.