The government's much-praised Help to Buy scheme is being threatened by rising house prices. According to the Intermediary Mortgage Lenders Association (IMLA), mortgage brokers and intermediary lenders are in agreement that value inflation could lead to a house price bubble, undermining Help to Buy. Of those surveyed, 60 per cent of lenders and 59 per cent of brokers consider rising prices to be the single gravest threat.
Lenders already expect a 2.7 per cent increase in average house prices by the end of the year, driving the average price to GBP 166,418. Based on the market's performance in the first half of the year, not to mention the added stimulus of Help to Buy, growth doesn't look likely to slow anytime soon - a fact that is proving to be a cause for concern. Experts claim that if the current rate of growth continues throughout the duration of Help to Buy, the average cost of a house will soar to GBP 180,265 by the end of 2016. This equates to a rise of 11 per cent in just four years.
Following this upwards trajectory, prices will find themselves near their 2007 GBP 181,975 peak - the point at which the market crashed. Current rates of growth may even rise further, meaning prices could overheat swiftly.
Peter Williams, executive director of the IMLA, said: "Pleasing though it is to see increasing levels of activity in the market and a swell of consumer interest, these findings spell out the importance of keeping control over any future growth. There is a clear consensus that first time buyers stand to benefit most from the second part of Help to Buy. But if house prices continue to rise for the duration of the scheme, then in essence we will be giving with one hand and taking away with the other."
He added that the exit from the scheme will need to be managed with the utmost care to avoid severely damaging the market. However, these aren't the only concerns over Help to Buy. According to IMLA, brokers feel there could be a lack of lender support for the scheme on the horizon. In fact, 48 per cent are concerned this will threaten the future of the project.
Nonetheless, lending is certainly improving and research from the Council of Mortgage Lenders has shown first-time buyer lending in London is now at its highest level since 2007. In the second quarter of the year, those new to the property market accounted for 11,200 house purchase loans in the capital.
- Monday 02 September 2013