The government used last month’s Budget to announce it would be extending the shared equity element until the end of the decade. Given the inability of the UK to build enough new houses over the past couple of decades (and perhaps long before that) this is clearly good news and should be welcomed by all, not just house builders.
Running this phase of the scheme in the long-term – and who is to say it won’t be extended beyond the end of 2019 by a future Government – makes sense and will go some way to helping the UK bridge the ‘supply side gap’ that remains an acute problem in our housing market.
Perhaps however the most important news for HTB2 is that there was no news at Budget time – George Osborne did not announce an extension for HTB2 in fact a Treasury spokesperson was quite explicit in their statement that the original three-year term for this part of the scheme remains in place.
While we agree that an extension is not justified, we (in this case) do not think that no news is good news. Indeed the fact that we are yet to hear a credible and clear exit strategy for Help to Buy 2 remains something of a worry.
The issue of housing supply is not simply going to be solved by the equity loan scheme – house builders are building new homes outside the scheme and need to know there will be buyers for these properties when they become available. To do this they need to be confident that the supply of high LTV mortgages will remain high otherwise it is unlikely they will go ahead and begin building the homes in the first place.
There is clearly a circle that could be broken if we do not retain and maintain a credible high LTV mortgage marketplace. We should be in no doubt about the impact HTB has had on the increased supply of 90/95% mortgages – not just from participating lenders but those who have been given the confidence to compete from outside the scheme – however this confidence might be short-lived if we do not have a plan for the future.
It seems quite obvious that guarantees are working – both State and private – and therefore if the Government is not going to maintain the State option, it needs to outline how it will move smoothly to a private alternative (which after all is already in existence).
Simon Crone is president of commercial mortgage insurance at Genworth