It may be the right time to close H2B2 but the environment must remain friendly for those who want to purchase later
The announcement that Help to Buy 2 will close as planned at the end of the year has been met with disappointment, worry and confusion over what it means for the provision of high-LTV mortgages in 2017 and beyond.
The suggestion that the scheme is no longer a necessity and that lending will not be affected seems dubious. Lending at high LTVs has fallen for several quarters and there is nothing to suggest this trend will not continue.
H2B2 undoubtedly acted as a catalyst for high-LTV activity but the initial surge has not been maintained. While lender members of the scheme are offering high-LTV products outside its parameters, we have to question whether this will continue at the levels required, especially for first-time buyers.
No one is suggesting the state should support high-LTV lending indefinitely. Indeed, we think it is right that the scheme closes. But what happens next?
There is already significant pressure on those seeking to lend in the high-LTV market. Particularly given the political climate, it would be prudent to allow them to secure the necessary level of capital relief outside the scheme via private mortgage insurance.
If this is not on offer, we anticipate only a diminishing appetite to lend in the higher-LTV sector, which would of course put those who require such lending the most – first-time buyers – back to where they started pre-H2B2. After slowly moving back in the right direction, the deposit requirements to get a mortgage and a home would rise.
It may be the right time to close this part of the scheme but we must ensure the environment remains friendly for those who want to purchase after the end of the year.
Pad Bamford is business development director at AmTrust Mortgage Insurance