Cameron brings help to buy forward
Published by Max Salsbury for 24dash.com in Central Government and also in Finance, Housing
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David Cameron has brought the government's help to buy scheme forward by three months.
Originally planned to launch in January, the scheme will see the government make £12 billion available to help house buyers borrow with only a 5% deposit.
Speaking to the BBC's Andrew Marr, the prime minister said fears that the scheme could cause another housing bubble were unfounded.
In July, business secretary Vince Cable warned that the policy could "inflate the market" and that he'd raised his concerns within the coalition.
Reacting to the announcement, Grainia Long, chief executive of the Chartered Institute of Housing, said: “Government guarantees can be a useful way of supporting housing market activity. But they must be very carefully designed to make sure they do not simply boost the availability of credit – and therefore demand – without leading to new supply.
"Increasing demand without ensuring new homes are built will only serve to increase prices, and paradoxically put homes out of reach of those who need them. If the government really wants to make housing more accessible and affordable, Help to Buy must be matched by a strong emphasis on building new homes to prevent inflated prices.”
“The chancellor announced last week that the Bank of England will be reviewing Help to Buy every year, which is a welcome move. But we think there is a strong case for the Treasury to put more regular monitoring in place. A year is a very long time in the housing market. If there is evidence that Help to Buy is increasing prices rather than supply then government should consider amending the guarantee scheme or even scrapping it, either across the whole country or targeted by areas based on what the evidence shows.”
Ben Thompson, MD Legal & General Mortgage Club, said: "There will of course be some surprise and even some scepticism with regard to this announcement and implementation being accelerated.
"Right now it remains unclear exactly what the scheme details and specifics are for lenders, and in that regard precisely who will participate other than RBS and Lloyds Banking Group.
"However, it is clear that there are potential first time buyers and movers who can afford to pay a new and increased mortgage monthly payment, but are having to spend significant time saving for a substantial deposit, larger than at any time in recent decades. This has to be fixed in order that families can live in suitable accommodation and enjoy home ownership in the same way that previous generations have. 95% lending has simply not become high risk overnight."
Nigel Morton, head of Real Estate for Charles Russell’s Cheltenham office, said: "The government needs to ensure that this is not a rushed decision and that it has been fully thought through and adequate safeguards developed to avoid any risks. As with any insurance contract, pricing is key. If the premium is miscalculated then either the lenders will not want to participate, or the government will be handing them a get out of jail free card.
"This is potentially dangerous as the government is effectively making a one way bet on the UK housing market over the next decade. In the event that the economic recovery falters during this period (or the Bank of England is forced to raise interest rates) precipitating a rise in defaults, lenders might be less inclined to show leniency over repossessions since it would be the government taking any loss and not them."
Sue Foxley, Head of Research at Cluttons, said: “Driving ahead with the second stage of help to buy is a certainly a bold move by the prime minister and reinforces his commitment to bolstering the property market, however, he needs to be careful to not exacerbate the housing challenge faced by aspiring home owners.
“Our latest research indicates that over a third of renters are currently concerned that they need to buy before prices rise any further, yet, increasing funding in the absence of new supply in the capital and the highly restricted residential areas in south east will hike-up prices well ahead of earnings and do little to alleviate renters’ fears.”
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