Residential Mortgages – The Help to Buy Scheme

The government recently announced two measures to help the housing market, and also the house building market.

The Help to Buy scheme meant that house buyers can put down a 5% deposit down on new builds from April 2013. Twenty per cent of the cost of the property will be funded by a shared equity loan, which will be financed by the government and will be interest free for five years.

The Help to Buy scheme has been welcomed by mortgage brokers, although there are concerns as to whether the chancellor’s measures will help second time buyers, which is an important sector.

Richard Alton runs Alton Mortgages, a whole of market broker based in Maidenhead. Established in 2005, customer service is at the heart of what they do, and they recognise that their clients are individuals with very unique requirements. He says:

‘The budget was very significant, there was massive commitment from the Government to underwrite up to 20% deposits for buyers up to £600,000 and if this supports up to 600,000 purchases it is indeed a massive financial commitment. The policy is aimed at the value of the house and not if you are a first or second time buyer.

“If it is the government’s objective to get the house market moving in every sense underwriting the deposits for first time buyers, home movers, new build and from January 2014 second hand properties then the Government couldn’t have done any more but it may come at a massive risk to the tax payer, it may also inflate house prices because at some point the scheme will have to stop (hopefully when the economy is out of recession). I am not sure it is healthy to artificially inflate house prices but I also know that if the government can get the house market going it does create a lot of jobs so can help feed the recovery.

“We really don’t want to go into a new housing bubble especially as we have suffered one of the worst downturns in living memory, the one thing that we do need is stability not peaks and troughs. Personally I would like steady but slow house inflation, nothing that gets out of control so we then don’t have to live with the consequences of severe downturns which are a massive negative for absolutely everybody.

Help to Buy really will help people to buy as it now only requires a 5% deposit to get you onto the housing market with a decent interest rate, up till now you really did need at least a 15% and preferable 25% deposit to get the better rates. Let’s hope the government get the numbers right and they end up making a profit from the scheme, because if it goes wrong the liability will be huge and after bailing out the banks I am not sure the British tax payer has the stomach for another liability on this scale.

“This Help to Buy scheme will have a massive impact on getting the market going as it is first time buyers and home movers as this is the segment that has been severely impacted by the credit crunch.

“I think the fact that the scheme is due to run for 3 years means that the government wants to give some light to the housing market which it desperately needs and the scheme takes us through to 2016 and I am sure everyone will be hoping that the worst of the recession is over by then. Don’t forget we are tied in to the EU and a lot of countries are in trouble so whilst your main trading partners are in trouble and not spending it will of course hamper our growth.

“It also seems that all the industry names are saying that the scheme will unblock the housing market and seeming the market has been blocked since 2009 and is only really slowly beginning to turn it is a good thing for everyone. People that want to buy can now buy as long as they can afford the monthly mortgage payments.

“I think that as a shadow chancellor it is very easy to critise but they were that ones that spent an absolute fortune bailing out the banks and in truth I expect if they were in office they would have come up with a similar scheme.

“I also think it is right that buying property to rent out for a commercial gain are excluded from the deal as this would have been one too far to take, imagine the tax payer underwriting the opportunity for you to make money on property via Buy To let, the aim of the scheme was to unblock the housing market and get capital going again and it will especially in January 2014 when non new build property is included. A lot of people don’t like new build property but the truth is new build houses provided a lot of jobs, which is why the government is keen to support it.

“As a country we are obsessed with house prices and with house price growth because the truth is when things are going well and house prices go up we all feel richer and more prosperous, the truth is if you only own one house them it is totally irrelevant, your current property is worth more but your next property will cost more.

“The scheme is irrelevant but what it has done is brought forward by perhaps several years people willingness to buy property sooner rather than later but in the long term it will probably not have affected transactions it simple means that people will buy in 2014 instead of 2018 thus hopefully bringing an end to this recession sooner rather than later.”

Notes to Editors

Alton Mortgages is an established whole of market mortgage broker based in Maidenhead, Berkshire. Established in 2005, customer service is at the heart of what we do, and we recognize that our clients are individuals with very unique requirements and do what we can to find low mortgage rates and the best residential mortgage deals. Click here to find why you should use a broker. We work with individuals and families to provide them with an exceptional residential mortgage service with low . Click here to find out more about Alton Mortgages .