he biggest news for the property sector from the March budget statement was the announcement of ‘Help to buy’ – a big investment in schemes designed to get the housing market moving.
George Osborne stated that the aims of the new initiatives, extensions of the current ‘NewBuy’ scheme, are to undo past setbacks to social mobility and assist home builders in a dramatic way.
Help to buy focuses on two key areas…
Firstly, £3.5bn of capital expenditure is being made available over three years to fund a shared equity loan programme for new build properties worth up to £600,000, approximately 90% of those in the UK. Buyers would need to provide 5% of the value, with the scheme then topping up a further 20%.
This is an extension to ‘NewBuy’, which was only available to first time buyers with a salary of less than £60,000 a year, and it is available to anyone wanting to buy a new build home, regardless of what they earn. It is interest free for five years and only has to be paid back when the property is sold.
Secondly, the government will be providing funding for a £130bn mortgage guarantee scheme over three years from 2014. This is to help lenders provide more high loan to value mortgages, helping those who are eligible for a mortgage, but who’ve been unable to save the necessary deposit.
Donna Houguez, Market Analyst for Quick Move Now, comments on the ‘Help to buy’ scheme announced in the March budget statement today:
I think it is admirable that the Government is making this statement of support to the property market, and it clearly hopes that creating movement in this one sticky area will, in turn, stimulate the layers above.
However, I am concerned that take up of past government schemes, from lenders, house builders and buyers alike, has been pitifully low and no rationale has been demonstrated to explain why ‘Help to buy’ is likely to be any different.
Also, mortgage lending criteria is tough, and set to get tougher in 2014, immediately limiting the number of people eligible.
I hope this scheme meets its stated aims of freeing up social mobility and assisting the house building sector, but unfortunately, without industry-wide support and promotion, it is unlikely to make a notable difference.