According to 23 per cent of first-time buyers, the best thing government could do to help them onto the property ladder is to stop taxing their deposit savings.
The finding comes from the quarterly Property Tracker report compiled by the Building Societies Association, which questions 2,000 consumers across the UK every three months.
Although one in five first-time buyers (20 per cent) say that government schemes like Help to Buy will help them get onto the property ladder, raising a deposit is the main deterrent for 54 per cent of those wishing to buy.
However, there are 60 mortgage products across the whole market – 40 from mutual lenders – available to those with a deposit of 5 per cent or less, according to Moneyfacts.
House prices
There are indications however, that one important factor in the housing market – consumer confidence – is on the up. For the first time in the last three years, the majority of consumers in June 2013 expect house prices to rise in the next year. Just 9per cent expect prices to fall over the next 12 months.
Historically, future prices expectations have been an indicator of consumer confidence, and in a market where most purchases are discretionary, is a guide to future activity.
Help to Buy: mortgage guarantee
One serious risk factor of the government’s strategy – already emphasised by the governor of the Bank of England and the Office for Budget Responsibility – is the potential for the inadvertent creation of a future house price bubble.
For the Help to Buy: mortgage guarantee scheme in particular, it is critical that the government designs and manages this scheme effectively, with a clear exit strategy right from the start if the clear market risk from state and ultimately tax-payer intervention is to be avoided.
Comment
Paul Broadhead, head of mortgage policy at the BSA, commented: “The Help to Buy: mortgage guarantee initiative cannot become a permanent feature of the market beyond the time when the country is in economic recovery mode. Care is needed to prevent the actions taken today inadvertently causing a distorted housing market in three years time – a market where state intervention has artificially hiked prices.
“There are encouraging noises from builders on sign-up for Help to Buy: equity loan. If this and other schemes do encourage builders to build – increasing supply and improving consumer confidence, it will be a success.
“If the government were to add some form of savings tax moratorium that would assist consumers by shortening the time they need to raise a deposit.”
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