Q: The government has brought Help to Buy forward and is throwing its weight behind the scheme, despite several objections being raised. What impact is this going to have on the market?
A: Whilst Help to Buy was initially met with its fair share of scepticism, there is no doubt that the market needed this, or a similar initiative, in order to get things moving again.
The single most important thing that the introduction of Help to Buy has done is to re-establish confidence in the sector. Mortgage lending has steadily increased this year, with the latest figures from the CML showing gross lending in August to be 28% higher than in the same period in 2012.
Stimulus from the government has undoubtedly helped this optimism take root, both on the side of lenders as well as from the perspective of consumers. Hopes of homeownership have become more realistic in the short term, leading to greater market activity and signs of recovery.
Obviously Help to Buy has not achieved this revival single-handedly, it has been a combination of record low rates and higher LTVs, in part spurred by FLS, alongside an improving overall economic outlook.
However, critics of the scheme feel that it may be in danger of causing a bubble in the housing market. The increased availability of mortgage products naturally leads to an increased demand for houses, and theoretically an inflation of prices.
It is important to remember that although talk of a bubble persists, the market is only gathering significant momentum in certain parts of the UK; namely London and the South East. The recovery and surge in demand is therefore extremely regional in nature, and we shouldn’t allow talk of a bubble to mislead us, or mask the bigger picture.
As touched upon in the Labour party conference recently, what we really need is an increased supply of affordable housing across the UK. This, coupled with more product innovation, will help to bring a healthier balance to the market and encourage this relatively fragile recovery to continue.
There is currently a huge shortage of new build housing in the UK, driving up prices and making buying a first home unaffordable for lots of people. Housing completions have fallen to historically low levels of around 125,000 per year and prices in certain regions continue to rise.
Whilst Help to Buy does have an important role to play, the availability of housing stock in the UK is really what needs to remain top of the agenda for the industry and the government alike.
