Help to Buy could spark house price bubble
Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said the Chancellor’s focus on the housing sector was to be welcomed but there was a risk it would stimulate demand without an equivalent increase in housing stock.
He said: “My concern is that this will have a house price effect rather than a supply effect.”
Yesterday’s Budget revealed plans from the government to launch a mortgage guarantee scheme to promote higher loan to value lending.
The scheme will be open to any type of borrower subject to affordability checks and will be backed by the government’s balance sheet.
And George Osborne claimed it would dramatically increase the availability of 95% mortgages.
However the Chancellor did not omit the supply of homes entirely from his budget.
Osborne announced plans to build 15,000 more affordable homes while increasing “fivefold” the funds available for building for rent.
But it has divided the industry with many concerned it won’t deliver what it hopes to.
Charles Haresnape, managing director of residential mortgages at Aldermore, was subdued about the impact of the scheme by questioning how far it could reach.
He said: “This is positive news and I think it will provide a useful boost to the market but I don’t think it will unlock a huge amount of demand because borrowers still have to meet stringent affordability requirements.
“Under the Mortgage Market Review all lenders must assess affordability, and quite rightly so, which will prevent a lot of borrowers securing the higher LTV loans.”
Haresnape said he thinks the scheme will be most useful to release the pent up demand in the second time mover market by providing for more first-time buyers who want to purchase the second stepper homes.
But he said it may take some time to bring this product to market.
He added: “This is still only an initiative at the moment and not many lenders will know about it. I welcome the government’s Help to Buy schemes but I still believe we need a more joined up housing policy. There are lots of separate initiatives but they need to be pulled together.”
Andy Frankish, new homes director at the Mortgage Advice Bureau, was pleased that the builder contribution had been dropped from this latest initiative allowing them to get 100% of their capital on day one.
He said: “By receiving the full price for a property at the point of sale, developers will be able to reinvest more in land and more building to really get some momentum going in the housing market.”