The chancellor has confirmed that the Help to Buy equity loan scheme will be extended until 2020. The announcement was made during the budget this Wednesday, although it had been mooted from the previous Sunday.
George Osborne said it was necessary to “be vigilant against risks in the housing market” and that while house building is up 23 per cent, it was not enough.
He also confirmed the delivery of £150 million for Right to Build and the building of 200,000 new homes for families.
Commenting on the budget revelations, John Penn, head of mortgage proposition at Intelliflo, said:
“The chancellor’s announcement to increase housing supply is a much needed step for the recovery of the economy. While this weekend’s decision to extend Help to Buy is good news for the mortgage market, the resulting increase in demand for property is pushing up prices. Help to Buy has boosted consumer confidence and, as a result, the housing market has been revived.
“However, housing supply is failing to meet this new demand. This is particularly true for London and the South East, where property prices have soared exponentially because of the housing shortage. Property ownership is unaffordable for an increasing number of people. A fundamental element to help solve this issue is to build more houses, and the Chancellor’s announcement today will go some way towards addressing that.”
Simon Crone, Vice president – mortgage insurance Europe for Genworth, pointed out the ominous lack of reference to the mortgage guarantee element of Help to Buy, which supports high LTV lending.
“Today’s Budget has still left vital questions about Help to Buy unanswered, with no clarity over the future for high loan to value (LTV) mortgage lending after 31 December 2016. The mortgage guarantee [Help to Buy 2] remains a temporary fix to a long-term problem of credit supply to first time buyers. The more time that passes without a clear exit strategy, the more we risk a ‘cliff’ effect in two years’ time that will undermine building and home-owning ambitions.
“The return of responsible 95 per cent lending since the last Budget has given hope to thousands by cutting the time needed to save a deposit by three years across the country and by six years in London*. Taking away that support will again leave many people on good salaries with no reasonable hope of ever affording a deposit on a home.
“The UK needs a permanent, stable market for high LTV mortgages, similar to Canada and Australia, if we are serious about supporting first time buyers. It shouldn’t fall on the taxpayer to underwrite these loans; instead, the government needs to actively explore a transition for the mortgage guarantee scheme to the private sector to avoid another high LTV lending blackout after 2016.”
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