While giving his view on the Help to Buy scheme to the Treasury select committee today, Paul Smee, director general of the Council of Mortgage Lenders, proclaimed concern that if the Government waivered from ending the scheme at the allotted target date of 2016, they could potentially damage the market more than supporting it for the future. Smee put forward a request for the Government to confirm the plan to extricate themselves from the scheme in 2016, or risk claims of a “cliff-edge” scenario developing as the life of the policy came to a close.
He went on to say that: “The taper should be determined soon. I am not saying when it should start, but before three years so that the scheme can close after three years, which I believe is the intention. I don’t think the scheme can be justified beyond the three-year point.”
When asked for his opinion on how the Government should adapt the scheme over time to manage its impact, Smee proposed lowering the maximum loan to value for new loans, decreasing the size of an acceptable mortgage on the scheme and increasing fees for the process.
Quoted in November, the Prime Minister David Cameron was unequivocal on his view of how the scheme was helping home buyers: “Every single day in the past month, 75 families have been put on the path to owning their dream home. This is working — some people have even got the keys already. But the best thing about Help to Buy isn’t these headline statistics. It’s who is benefiting from it.”
A month on, and the Chancellor George Osborne has consistently defended the efficacy of the scheme, noting that it should not be seen as a catalyst for rising property prices in the capital. While being questioned on the matter in the commons last week, Osborne rejected claims made by the Chairman of the Treasury select committee, Andrew Tyrie, that prices were being artificially inflated by the scheme.
He said that, in an echo of David Cameron’s own statement from November, the average price of property the scheme had been agreed on was £160,000, adding: “It’s dealing with exactly the families we want it to help.”
Commenting on the point, Simon Butler of Contractor Mortgages Made Easy said: “The inference of this statement appears be that London and the South of England are not necessarily parts of the UK that the Government developed the scheme to assist. What this doesn’t unfortunately answer is how they plan to aid buyers particularly in the capital who face an average purchase value way in excess of the rest of the UK.”
According to the property search engine, Rightmove, many property buyers do not understand the application of the scheme, and whether they are actually eligible for either of the two variations on offer. Of the first time home buyers the site canvassed for their personal view on the matter, 23 per cent incorrectly stated it only applies to new build properties. In addition, 22 per cent responded to say that they did not know the maximum purchase value available is £600,000.
Miles Shipside, the director of and housing market analyst at Rightmove said: “Although it’s still too early to judge the impact of the scheme, we anticipate that more first-time buyers getting onto the bottom rung of the housing ladder could have knock-on effects further up, helping more people to trade up and downsize.
“Many have postponed their move over the last few years as either limited equity or lack of confidence has left them unable or unwilling to. This scheme has the potential to offer hope and confidence to many of these homeowners enabling them to come to market and free up some much-needed supply."
Article By: Jon Sheilds, Media Executive at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
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