News Review
Lenders fear a return to 2007 house prices
By Samantha Cordon and Ryan Fowler
Mortgage brokers and inter- mediary lenders are united in their concern that infl ated house prices are the gravest threat to the success of the Help to Buy scheme, latest re- search from the Intermediary Mortgage Lenders Association revealed last month. IMLA’s Intermediary Lend-
ing Outlook showed almost two thirds of intermediary lenders and brokers (60% and 59% respectively) single out a house price bubble as the most likely factor that may under- mine the government scheme. T e research showed lend-
ers already anticipate a 2.7% increase in the average house price by the end of the year, pushing it to £166,418 accord- ing to the Land Registry mea- sure. If this same growth rate con-
tinued for the duration of Help to Buy, the average house price would reach £180,265 by the end of 2016. T is would
bring house
prices close to their last peak of £181,975, which was re- corded in November 2007. Brokers also registered sig- nifi cant concerns about a po-
tential lack of lender support for Help to Buy, with almost half worried this will jeop- ardise the scheme (49%). But just one in fi ve in-
termediary lenders openly shared this sentiment (20%) yet almost half saw the capi- tal weighting requirements as a major barrier to success (47%). T e same proportion of the
lending community is con- cerned that an over-reliance on government funding will handicap Help to Buy (47%), while more than a quarter cite structural weaknesses in the mortgage market (27%).
First-time buyers Despite these concerns both groups agree that fi rst-time buyers will see the greatest
1. Artificially inflated house prices
2. An over-reliance of government funding 3. Restrictions on lenders’ capital ratios 4. Structural weaknesses in the market 5. A change of government
6. Unattractive pricing for lenders 7. A lack of lender support
8. A downturn in the wider economy benefi t from the upcoming
Help to Buy mortgage guaran- tee: 100% of lenders and 89% of brokers took this view. Lenders are more optimis-
tic than brokers about home movers benefi tting (80% vs. 56%). Peter Williams, executive
director of IMLA, said that although it was pleasing to see increasing levels of activity in the market and a swell of con- sumer interest, the fi ndings spelt out the importance of keeping control over any fu- ture growth. “T ere is a clear consensus
that fi rst-time buyers stand to benefi t most from the sec- ond part of Help to Buy. But if house prices continue to rise for the duration of the scheme, then in essence we will be giv-
What are the biggest threats to the success of Help to Buy? Lenders
60% 47% 47% 27% 27% 27% 20% 20%
Brokers
1. Artificially inflated house prices 2. A lack of lender support
3. An over-reliance of government funding 4. Restrictions on lenders’ capital ratios 5. A downturn in the wider economy 6. Structural weaknesses in the market 7. A change of government
8. Unattractive pricing for lenders
59% 49% 38% 20% 19% 18% 17% 15%
ing with one hand and taking away with the other. Moreover the exit from the scheme will need to be managed very care- fully so it without causing seri- ous harm to the market. “If people are struggling to
raise deposits in the current climate then a further 11% increase in house prices will liſt the property ladder even further out of reach for some. House builders are attempt- ing to bridge the ever growing chasm between supply and de- mand which is going to be es- sential to ensure we help more people to access the property ladder without creating new hurdles in the form of infl ated house prices. “In the meantime, the pres-
sure is on to ensure Help to Buy is more inclusive than divisive.
We’re here for every step of finding a flexible mortgage solution
4 MORTGAGE INTRODUCER SEPTEMBER 2013
www.mortgageintroducer.com
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