According to the latest outlook report from the Intermediary Mortgage Lenders Association (IMLA) 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 undermine the government scheme.
The research shows lenders already anticipate a 2.7% increase in the average house price by the end of the year, pushing it to £166,418 according to the Land Registry measure. Lenders’ prediction is based on the market’s performance in the first half of 2013 and the initial impact of the Help to Buy equity loan scheme.
If this same growth rate continues for the duration of Help to Buy, the average house price will reach £180,265 by the end of 2016, an overall rise of 11% in four years. This would bring house prices close to their last peak of £181,975, which was recorded in November 2007. There are concerns that the rate of increase could be even greater with the upcoming Help to Buy mortgage guarantee offer still to launch in January 2014.
Brokers also register significant concerns about a potential lack of lender support for Help to Buy, with almost half, 48%, worried this will jeopardise the scheme.
Just 20% of intermediary lenders openly share this sentiment yet 47% see capital weighting requirements as a major barrier to success. The detail of capital relief is still to be confirmed by the Treasury and will greatly influence lenders’ ability to back the initiative.
The same proportion of the lending community is concerned that an over reliance on government funding will handicap Help to Buy, while 27% cite structural weaknesses in the mortgage market. This market imbalance is of as much concern as a change of government in the next general election with 27% saying so.
Despite these concerns both groups agree that first time buyers will see the greatest benefit from the upcoming Help to Buy mortgage guarantee with 100% of lenders and 89% of brokers taking this view.
Lenders are more optimistic than brokers about home movers benefitting at 80% compared with 56%. While the guarantees will also be available to existing home owners seeking to move to another lender, just 13% of lenders and 6% of brokers see the scheme as benefitting home owners remortgaging their properties.
‘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,’ said Peter Williams, executive director of the IMLA.
‘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...
Most Popular Slideshows
- Victoria's Secret Fashion Show 2013: Models' Ramp Walk Aired on Tuesday [PHOTOS]
- Victoria's Secret Fashion Show 2013: Bold, Sexy and Sensuous Lingerie Fashion [PHOTOS]
- Victoria's Secret Fashion Show 2013: Drooling Guys, Conscious Girls, Naughty Jokes on Twitter [SEE PHOTOS]
- Victoria's Secret Fashion Show 2013: Best Pictures From The Sexiest Show Ever [ SEE PHOTOS/VIDEOS]