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As the housing and large mortgage market in the UK continues to recover, the Government is coming under increasing pressure to scrap Help to Buy scheme plans, originally scheduled to launch in January 2014.
Experts are concerned that the scheme is set to create another housing bubble, with signs that house prices in the UK are already rising as a result of wider access to mortgage finance. Lending to first time buyers has reached a six year high and many commentators believe the market does not need an additional stimulus. Keep reading to learn more.
According to new figures from the Council of Mortgage Lenders (CML), there were 68,200 mortgages advanced to would-be homeowners between April and June 2013, the largest quarterly total since 2007.
Loans to first time buyers reached 25,000 in June, a rise of 30 percent on a year ago. The increase has been attributed to a wider availability of mortgage finance and the governments’ existing Help to Buy scheme.
“First-time buyers have been a strong driver in the growth of mortgage lending this year proving that market conditions are favourable for them,” said Paul Smee, director-general of the CML.
The data comes after separate reports from other major bodies, including the Royal Institute of Chartered Surveyors, suggesting that there is house price growth across the country.
Experts say the government’s planned support for home buyers risks pushing house prices further out of reach for buyers in the future. Campbell Robb, chief executive of the charity, Shelter, said: “Some will see house price inflation as good news, but with a priced-out generation and their parents worried about their prospects of climbing on to the property ladder, the result will be many people tempted to overstretch themselves before prices rise completely out of reach.”
The Financial Times reports that first-time buyers already have to borrow more because of the recent growth in house prices with the average loan size rising from £112,500 in May to £117,000 in June.
“Giving government guarantees to would-be homebuyers to allow them to buy without a significant deposit is likely to stimulate the mortgage market further,” said Islay Robinson, CEO of London mortgage advisor Enness Private Clients.
“Whether the market will need another boost in the New Year is the key question. An increased demand for homes is likely to push up prices which, of course, makes it more difficult – not easier – for some people to get onto the housing ladder,” he added.
The FT also reports that higher house prices mean more people are falling into higher stamp duty tax bands. According to the Tax Payers’ Alliance, almost two-thirds of home sales in London are now hit with higher rate stamp duty charges of more than 3 percent, while the CML said that only a third (34 percent) of first-time buyers in June bought a home worth less than £125,000, where no stamp duty is charged, down from 37 percent in May.