Governments across the globe are trying to stir up demand in their housing and mortgage markets, which eroded dramatically during the financial turmoil. The crisis also saw the failure of “too big to fail” financial institutions and affected lending to small businesses and potential home buyers. In the UK, the government’s latest attempt to tackle the housing crisis came in the form of the Buy to Let Scheme, announced by chancellor George Osborne in the March budget. Whilst its purpose is to help borrowers buy a home more easily and assist young people and families in getting their foot on the housing ladder, it’s always best to hear the thoughts of an experienced professional to see how it relates to us.
According to Russell Quirk, an estate agent with over 15 years of experience and founder of eMoov, the new Help to Buy scheme will be by all means a great help to home buyers. However, there is an increasing concern that if left unchecked, the mechanism may prompt over inflation of house values in the South of England. He believes that first-time buyers running low deposits will be the ones who benefit most from the scheme. This, he claims, will be a positive development, since this particular group of buyers supports the market. Sellers will be also amongst the winners, since prices will likely increase as a result of stronger demand.
Asked about the risks for buyers planning to embark on the scheme, Quirk identified affordability as the top challenge. “A low deposit coupled with low interest rates may mean that buyers get back to the comfort zone of disregarding financial commitment, especially if interest rates rise and mortgage payment increase,” he stated.
Quirk also tried to alleviate fears that the UK is about to see yet another housing market bubble, noting that although the market is reaching a tipping point in the capital, it is “not just about London.” In the North East and West, Northern Ireland and Wales, for instance, the property market is “barely thawing,” he said.