Strutt & Parker believes the new mortgage guarantee is good news. He explains: “This will help those who do not
Strutt & Parker believes the new mortgage guarantee is good news. He explains: “This will help those who do not have a substantial deposit but can afford the monthly mortgage payments. Anything which frees up the availability of mortgages and gives mortgage lenders the security and confidence to know they will be repaid is undoubtedly positive as one of the factors influencing buyers’ decisions is the lack of mortgage finance. This initiative will help buyers move up the housing ladder and inject some momentum into the whole housing industry.”
Neither of the two mortgage schemes will help those who want to become buy-to-let landlords, since you must live in the property to use the scheme. Further details will be available on the second scheme later in the year. Homebuyers will also be able to use the current NewBuy scheme, also available to first-time buyers with a deposit of at least five per cent who want to buy new-build property.
Lucian Cook of Savills added: “Recent budgets have challenged the top end of the market; this one looks to support the bottom end. We still expect a top down recovery as we’ve seen in previous cycles, but this budget should give a boost to the lower tiers of the housing market.
“We believe that the Help to Buy initiatives will have a much bigger impact on the functionality of the market and transaction levels than previous Government schemes such as FirstBuy and NewBuy.
“We also expect the schemes announced to give a bigger boost to house building, although we still forecast levels of construction well below the 230,000 new homes needed a year.”
Savills research estimates that the £3.5 billion Equity Loan scheme has the capacity to support 75,000 new homes sales over the next three years — the equivalent of 25,000 more sales a year.
Whilst that would only increase transaction levels across the whole of the housing market by around 2.5 per cent, it is likely to have a much bigger impact in the first-time buyer and second stepper markets which have been most affected since the credit crunch.
“Previous measures have largely ignored the plight of second steppers who have found themselves stuck on the first rung of the housing ladder having seen their housing equity at best stand still, these measures giving them some hope of trading up.”
The new Mortgage Guarantee scheme, which is extended to existing homes as well as new build, should give the market a further boost.
According to calculations by the Savills Research team, the Mortgage Guarantee scheme has the capacity to enable 550,000 extra house sales over the next three years if it translates in to £130 billion of mortgage lending.
The would represent a 34 per cent boost to current mortgage reliant sales and increase the overall number of housing transactions (including cash sales) by 19 per cent. “However it remains to be seen whether £12 billion of guarantees can translate into mortgage lending over 10 times that figure, particularly given the conditions applying to the grant of mortgages that can receive support.
“We should not lose sight of the fact that even if this increase in housing transactions is fully delivered, they will still remain 30 per cent below long-term trends, meaning continued pressure on the private rented sector. A five fold increase in the Build to Rent Fund is therefore very welcome. In the long run its success is more important to generation rent that measures to improve access to home ownership.”
Richard Winter, head of Savills Surrey region comments: “At a first glance, this scheme which is designed to help existing owners and first time buyers to buy a new home, appears to be a positive one. The ability to
borrow 20% of the property’s value, interest free for five years, will no doubt attract a new wave of buyers to the market, who were not previously in a position to buy. The equity loan strand of the scheme, an extension of the
existing First Buy scheme, could have immediate impact for buyers of new build properties with availability from April 1st of this year. If ‘Help to buy’ has the desired effect, we anticipate it will boost levels of
residential development in Surrey. In the short term the greatest benefit will felt by first time buyers, whilst also helping second steppers to upsize, we believe this will be particularly prominent in Surrey where much of our market is driven by people moving to their second home from London, looking for more space and a larger property.”