Cameron sur­prises ev­ery­one with boost for buy­ers

Help to Buy launches next week af­ter a shock an­nounce­ment by the Prime Min­is­ter. So what does it mean for buy­ers? Sharon Dale re­ports.

Yorkshire Post - Property - - PROPERTY -

DAVID Cameron left crit­ics dumb­founded when he re­vealed that the next phase of Help to Buy would be brought for­ward.

The scheme, which was set to start in Jan­uary, had been lam­basted amid fears that it could cre­ate another hous­ing bub­ble, but the PM has ig­nored the naysay­ers.

It will now launch next week and is open to all, not just those buy­ing for the first time. It can also be used on ex­ist­ing, sec­ond­hand prop­er­ties as well as new builds up to a value of £600,000.

It aims to take the risk out of lend­ing by guar­an­tee­ing up to 15 per cent of a mort­gage. It is not a loan, just an insurance pol­icy, but it will en­able banks to lend con­fi­dently to those who only have a five per cent de­posit. At the mo­ment it is dif­fi­cult to find a mort­gage with favourable rates with­out at least a 10 per cent de­posit .

Gov­ern­ment-backed lenders Lloyds and RBS are al­ready com­mit­ted to the three-year scheme and more banks looks set to fol­low.

How­ever, al­though they will be able to ap­prove loans from next week, they will not be able to ac­cess the Gov­ern­ment guar­an­tees un­til Jan­uary.

This means bor­row­ers will not be able to com­plete a house pur­chase un­til Jan­uary 2 at the ear­li­est.

The au­da­cious bid to get the prop­erty mar­ket mov­ing was re­vealed on the eve of the Con­ser­va­tive Party Con­fer­ence and, de­spite crit­i­cism from econ­o­mists and an­a­lysts, it looks set to be a vote win­ner.

The day af­ter the an­nounce­ment, traf­fic to Rightmove’s Help to Buy sec­tion in­creased four­fold.

Miles Ship­side, di­rec­tor at the prop­erty por­tal, says: “A lot of the talk to this point has been about the pol­i­tics of the scheme and the im­pli­ca­tions of gov­ern­ment in­ter­ven­tion in the hous­ing mar­ket but this is the clear­est sign yet that, try­ing to make sense of all the de­bate, are lots of home movers for whom this scheme is gen­uinely ex­cit­ing.”

But he warns of a po­ten­tial lack of sup­ply and is urg­ing the Gov­ern­ment to make it clear that it isn’t just for first-time buy­ers.

“The scheme is open to all buy­ers look­ing for a home and all prop­er­ties up to £600,000. More than 90 per cent of prop­er­ties listed for sale on Rightmove are un­der that price thresh­old.

“The signs are clear that the scheme will stim­u­late de­mand but, in a mar­ket al­ready short on new list­ings, the onus must be on stim­u­lat­ing sup­ply too. Per­haps the Gov­ern­ment should em­pha­sise that the scheme is open to ex­ist­ing home­own­ers look­ing to trade up too.”

One of the con­fus­ing fac­tors is the ex­ist­ing Help to Buy eq­uity loan scheme, which launched in April. It is aimed pri­mar­ily at first­time buy­ers with a max­i­mum in­come of £60,000 and is avail­able only on new builds.

The buyer agrees to an eq­uity loan of up to 20 per cent, which is in­ter­est free for five years, to add to their own five per cent de­posit. This leaves them with re­pay­ments on a 75 per cent mort­gage loan.

Franz Muehlthaler, a mort­gage ad­viser for Hol­royd Miller Prop­er­ties, says: “I do not un­der­stand the rush to put the new scheme out now rather than let it be prop­erly un­der­stood by all con­cerned.

“Some lenders were strug­gling to im­ple­ment changes for the orig­i­nal Jan­uary 2014 launch, let alone to get to grips with sys­tems and ap­pli­ca­tions with ef­fect from now. It could also lead to too many ap­pli­ca­tions be­ing made over the com­ing weeks, only for them to get re­jected as lenders will not have not had chance to im­ple­ment un­der­writ­ing strate­gies prop­erly. This will mean re­jec­tions now for peo­ple who may be ap­proved in a cou­ple of months’ time.”

Franz adds: “I worry that a lot of peo­ple will see this as a guar­an­tee of gain­ing a mort­gage, be­liev­ing in some way that the Gov­ern­ment will guar­an­tee­ing a por­tion of the bor­row­ing no mat­ter what. Peo­ple must un­der­stand it isn’t a get a prop­erty quick and easy scheme. The usual cri­te­ria ap­plies and that means you have to show you can make the re­pay­ments and that your credit his­tory is good.”

Kevin Hollinrake, MD of York-based es­tate agency chain Hunters, feels that the scheme’s pri­mary aim to “get the mar­ket mov­ing” may have been taken over by events. The signs are that prop­erty prices and ac­tiv­ity are start­ing to re­cover from a five year slump. He be­lieves prices in York­shire have risen by five per cent al­ready this year.

“When this scheme was orig­i­nally pro­posed in March, the mar­ket was in a com­pletely dif­fer­ent place. Since then our sales vol­umes have in­creased by 35 per cent and prices are in­creas­ing. Ev­ery sale we agreed in one of our of­fices last week went to best of­fers and we are con­cerned that more de­mand with­out a sim­i­lar in­crease in sup­ply will over­heat the mar­ket.

“The Gov­ern­ment has ap­par­ently handed the Bank of Eng­land the role of su­per­vis­ing the new scheme. in­clud­ing the abil­ity to limit it if things get too frothy which is re­as­sur­ing.

“We think the scheme is a good one. We just need to make sure that lend­ing doesn’t get out of con­trol again.”

RIGHT PRE­SCRIP­TION: Wood­side House has been in the same fam­ily for al­most 100 years and is full of pe­riod fea­tures. It has been mod­ernised and in­cludes a po­ten­tial an­nexe cre­ated from space once used for the GP surgery.

VOTE WIN­NER?: David Cameron sur­prised house­buy­ers and the hous­ing in­dus­try by bring­ing the new Help to Buy scheme for­ward by three months.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.