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Help to Buy storing up trouble

Robyn Hall

January 10, 2014

Some 49% of brokers responding to a survey from UTB thought the scheme could be creating a bubble which may lead to longer term property market problems.

But two out of three (67%) also thought that for the time being the scheme is having a positive impact on the residential property market.

Figures from Nationwide released last week suggest that house prices rose by 1.4% in December 2013 taking the annual rate of increase to 8.4%.

Noel Meredith, director at United Trust Bank, said: “It is clear that sales activity in the residential market has been increasing over the past year. Initiatives such as the Funding for Lending and the Help to Buy schemes have certainly helped to provide a boost in many areas by making it easier for those with smaller deposits to buy new homes.

“However, there is clearly some uncertainty over how beneficial these schemes will turn out to be over the longer term and what damage could be done by creating an artificial bubble. The news that the Bank of England under Mark Carney has withdrawn Funding for Lending support for mortgages is a strong indicator that the Governor shares many brokers’ concerns that house price inflation could get out of hand if left unchecked.

“The Help to Buy scheme should, for the time being at least, be unaffected. The ability for people to be able to attain reasonably priced mortgages without having to raise unfeasibly large deposits remains an important factor if the UK wide recovery of the residential property market is to continue. This can be done without the Bank of England continuing to pump vast amounts of cheap money into the mortgage market but does require mortgage lenders to maintain their appetite for providing 95% mortgages at competitive interest rates. This means that the government will almost certainly have to continue to provide lenders with mortgage guarantees in the first quarter of 2014 at least.”


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