There is increasing talk that the mortgage guarantee part of the scheme is funding another housing bubble however and growing talk that Mark Carney, the governor of the Bank of England, does not like the scheme and thinks that the UK housing market is unsustainable.
Whatever the facts of the scheme, it looks increasingly likely that the Chancellor will bow to pressure to change or modify the second guarantee part of the scheme. The new-build element, on the other hand, has been broadly welcomed for its part in encouraging more house building and increasing supply.
I expect to see it modified in such a way that it looks like the Chancellor is responding to concerns but actually the core users of the scheme remain unaffected.
As such, I expect that the upper limit of £600,000 will be significantly reduced as only 31 people used the scheme for properties above £500,000 in the first six months of its operation..
I doubt any changes will happen quickly, however, as the scheme launched in October last year, I think that the Chancellor will use the six month figures to justify keeping it out there for another six months and then announce any amendments in his autumn statement at which point the scheme will be a year old and the government can laud its positive effects. At its current run rate, more than 14,000 households are likely to have bought a property using the scheme at that point.
Love it or hate it, what it has done is boost consumer confidence and kick start the mortgage market. The launch of the scheme was the equivalent of a huge sign saying ‘mortgage market open for business’.
It brought high LTV mortgages back to the market to the point where there are many more lenders now offering 95% LTV mortgages outside the scheme. It gave brokers another reason to contact both new and existing customers. Finally it has been that rare beast, a positive news story that every media outlet wanted to talk about.
Toni Smith is sales operations director at First Complete
