‘Help to Buy’ Pulled Forward – Good or Bad?

Oct 1, 2013


The Government recently announced further assistance for the housing market. In addition to ‘New Buy’ and such like which were schemes designed to encourage help for first time buyers and new build homes, Help to Buy is a scheme that is set to ‘use’ up to £12 billion of tax payers’ money to guarantee the mortgage deposits of would be property buyers. But the significant aspect to this is that it applies to ALL buyers (not just FTBs) and ALL types of home (not just new builds). The maximum property value is £600,000 and so this initiative will, surprisingly, have tentacles that reach as high as the London market. And this, say some, is the issue with Help to Buy particularly as it’s launch has been accelerated to this month from the February 2014 date that was previously set. No coincidence that this latest announcement was made at the Conservative Party Conference at Manchester and in the wake perhaps of a Labour gathering last week that saw Ed Miliband take first prize for consumer appealing initiatives such as freezing energy prices, should he win the keys to Number 10. Many pundits are decrying the artificial respiration that Help to Buy amounts to in its pledge to ‘pay’ up to 15% of a purchaser’s mortgage deposit so long as you can muster the remaining 5%. Crtitics say that it will lead to an over heated property market and further bust to follow a prophesised boom. However the reality is that it is only London and the South east that are experiencing any notable rise in prices and activity. Research from Hometrack, the estate agency sourced housing market analysts this week states that in fact 41% of the UK market is subject to such buoyancy. Which means 59% is not. Whilst London and close by must be watched closely to somehow prevent a ‘macro-boom’ and a regional mechanism found to alleviate bumps in values, Help to Buy is bound to assist very many nationally spread house buyers that have been locked out of the market by stubborn lenders that are still failing to offer natural low deposit mortgages in the main or, if they are, at a penalty in interest charges. This despite being bailed out, propped up and fed fat again by the tax payer. Property values underpin the wider economy and provide a fillip to consumer spending. Yes, they must be kept in check but let’s not talk ourselves yet again into impending housing market death before it has even managed to crawl out of its cot.