A helping hand for the property market?

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In its 2013 budget, the Government announced various financial support plans intended to invigorate the residential property market. One of these was the Help to Buy initiative, which includes a mortgage guarantee scheme whereby lenders can offer mortgages which are guaranteed by the Government. The scheme was officially launched, some three months ahead of schedule, on 8 October 2013. High street banks including Natwest, RBS, Halifax and Bank of Scotland have released their rates and already started offering mortgages on properties valued at up to £600,000 with only a 5% deposit and a 95% mortgage, and with up to 15% of the value of the property being guaranteed by the Government (in return for a fee from the lender).

The September 2013 RICS Residential Market Survey charts an almost four-year high in both house prices and the number of properties sold. The survey credits some of that growth to the Help to Buy equity loan scheme which was introduced in April and which has enabled more buyers to access the market. Increasing numbers of buyer enquiries and now the launch of the mortgage guarantee scheme are also pushing price and sale expectations to further highs for the coming three to twelve months.

Whilst it does seem that Help to Buy is contributing to a boost in the residential market, there is concern that the supply of property to the housing market is lagging behind. That could cause a destabilising boom and bust, particularly if the market becomes reliable on the Help to Buy scheme, which is actually due to run for just three years. There is also concern that positive and sustainable growth in the residential market is not currently being seen nationwide, and that the position with particularly sought after areas or types of property are distorting the market overall.

Banks have been preparing for a stampede on Help to Buy mortgage applications, with some even extending opening hours to cater for the rush. Walker Morris will continue to monitor whether what’s good for mortgage business in the short term is good for the residential market overall.