Knight Frank: Help to Buy housing boom “highly unlikely”
Simon Gammon, head of finance at the global real estate consultancy, said that when you looked at those lenders taking part in the scheme it was likely that many would have been “persuaded”.
He said: “If you just take a step back for a second and look at which banks that have committed to Help to Buy, most of them are from part-nationalised banks.
“Perhaps they will have been ‘persuaded’ to take part. Just look at how many of the other major lenders in the UK market have yet to come forward.”
Gammon added that most UK High Street lenders want to limit new lending and deleverage their balance sheets.
“Help to Buy may on the face of it appear attractive to the first or second time buyer, but many lenders probably won’t take it up,” he said. “And if you look at the pricing of products hitting the market this, those who have committed so far have priced their products unattractively. Such high pricing will dampen enthusiasm for the scheme.”
Gammon also questioned the underwriting of any Help to Buy applications, stressing that lenders would still have a responsibility to ensure each loan was affordable to that potential borrower.
He said: “With such high rates launched, and factoring in a rate rise in the next few years, many of the lenders that are involved will actually then deem the loan unaffordable to the applicant, and decline the loan. This will only make it harder to access Help to Buy.”
Even if Help to Buy did cause a housing boom, he went on to say, the Bank of England have already come forward to say that in such an event they will influence the market to reduce the amount being lent.
“Logic would therefore dictate that stopping Help to Buy would be one of the easiest ways to do that,” he added.
“Help to Buy’s heart is in the right place, but it needs good lending partners to make it succeed and I am just not convinced they exist right now.
“Everyone is talking about whether the government’s Help to Buy scheme will lead to a UK Housing Boom. Personally speaking, I think that this is highly unlikely.”