In practice it’s much too soon to tell. Nevertheless, opinion does seem to be pretty sharply divided.
Much was made of the new Help to Buy scheme. This comprises two elements. The first is a new shared equity scheme, starting next month, and designed to help people buy new-build homes up to a price ceiling of £600,000. Essentially a revamp of previous schemes, it means that someone with a 5% deposit will be eligible for a Government loan of a further 20% - effectively making it possible to buy a new home with a 75% mortgage. This has of course been welcomed by the house-building fraternity. However, previous schemes have proved fairly ineffectual.
The second and more significant element is a new £130-bllion mortgage indemnity scheme, whereby the Government will effectively stand as guarantor for people taking out up to 95% mortgages to buy any property, old or new – again up to a price ceiling of £600,000. The aim is to stimulate the housing market as a whole – particularly, for example, helping those so-called “second-steppers” who want to move up to the next rung on the property ladder, perhaps in order to accommodate a growing family, but who are currently constrained from doing so by lack of savings or even negative equity.
A good idea? In theory, yes. However, serious questions are already being raised. For one thing, the scheme isn’t due to start till next January – so what’s going to happen in the meantime? Why would anyone struggle to buy now, if in a year’s time they can do so with a nice comfy taxpayer-backed mortgage? On the other hand, why would lenders run the risk of offering any high loan-to-value mortgages between now and next year, when the guarantee scheme kicks in? Some in the industry therefore see this as potentially sending the market into hibernation for the next 9 months.
But in any case, should the Government be involving itself (and all of us) in artificially supporting the market in such a way? I’m not so sure.
Could the Chancellor have done anything different? Certainly – he could have announced a root-and-branch reform of the Stamp Duty regime. Now that really would have helped stimulate the market. But of course, it would also have hit the Government right where it hurts most, in the wallet!
Friday, 22 March 2013
How much difference will last week’s Budget make to the housing market?
In practice it’s much too soon to tell. Nevertheless, opinion does seem to be pretty sharply divided.
Much was made of the new Help to Buy scheme. This comprises two elements. The first is a new shared equity scheme, starting next month, and designed to help people buy new-build homes up to a price ceiling of £600,000. Essentially a revamp of previous schemes, it means that someone with a 5% deposit will be eligible for a Government loan of a further 20% - effectively making it possible to buy a new home with a 75% mortgage. This has of course been welcomed by the house-building fraternity. However, previous schemes have proved fairly ineffectual.
The second and more significant element is a new £130-bllion mortgage indemnity scheme, whereby the Government will effectively stand as guarantor for people taking out up to 95% mortgages to buy any property, old or new – again up to a price ceiling of £600,000. The aim is to stimulate the housing market as a whole – particularly, for example, helping those so-called “second-steppers” who want to move up to the next rung on the property ladder, perhaps in order to accommodate a growing family, but who are currently constrained from doing so by lack of savings or even negative equity.
A good idea? In theory, yes. However, serious questions are already being raised. For one thing, the scheme isn’t due to start till next January – so what’s going to happen in the meantime? Why would anyone struggle to buy now, if in a year’s time they can do so with a nice comfy taxpayer-backed mortgage? On the other hand, why would lenders run the risk of offering any high loan-to-value mortgages between now and next year, when the guarantee scheme kicks in? Some in the industry therefore see this as potentially sending the market into hibernation for the next 9 months.
But in any case, should the Government be involving itself (and all of us) in artificially supporting the market in such a way? I’m not so sure.
Could the Chancellor have done anything different? Certainly – he could have announced a root-and-branch reform of the Stamp Duty regime. Now that really would have helped stimulate the market. But of course, it would also have hit the Government right where it hurts most, in the wallet!
