How much of a help is ‘help to buy’?
Gemma Harle is managing director of TenetLime
Let me begin by declaring that I heartily welcome the new ‘Help to buy’ mortgage guarantee scheme and feel sure it will benefit a lot of people who previously thought that buying a house was out of their reach.
More high-profile lenders are joining the initiative. The supporting PR has been good, creating the impression that it is capable of turning things round. And experts are predicting that an extra 160,000 first-time buyers will get a foot on the ladder.
But please don’t think me pessimistic if I offer a few words of caution…
Help to buy needs to be viewed as an enabler, not a solution. The availability of 95 per cent loans cannot be allowed to gloss over the fact that affordability remains the absolute key issue.
Whatever a buyer gains from paying a smaller deposit must be balanced against the consequent higher monthly repayments. Bear in mind too, that the scheme only lasts for three years. It is not a long-term fix.
People will only be allowed to borrow what they can afford, so any advantage offered by a smaller deposit will not be without consequence.
On top of all that, solicitors look set to hike their fees too, even though no extra work is required.
Interestingly, reaction from lenders has been mixed.
Whilst it is encouraging to see day one backing from the likes of the Halifax, RBS and NatWest, several other big names have gone no further than announcing their intention to join, prior to making a final decision when the exact nuts and bolts of the scheme are confirmed.
The likes of Barclays, HSBC and Santander have still to come on board, preferring instead to wait for the opportunity to assess any process and sourcing implications before revealing their support package.
All in all, the popular misconception amongst both brokers and consumers that ‘help to buy’ is capable of single-handedly revitalise the housing market needs to be discreetly dispelled. It isn’t.
However, it is an exciting addition to the mortgage mix: promoting further confidence and enhancing the current growing momentum.
Despite my apparent reservations, it has my full support!