View more on these topics

Schroders warns Help to Buy will not be the ‘free lunch’ expected

The Help to Buy mortgage guarantee scheme is not a “free lunch” and says bank take up will be hampered by the fact the Government is not paying for the guarantee itself, says fund manager Schroders.

In an investors note, published last week, the fund manager warned that some lenders may find the fee being charged by the Government to be “unattractive”.

The note said: “From the perspective of borrowers, this is equivalent to help in raising the deposits of borrowers, but for banks, it is an insurance scheme, which may be unattractive depending on the level of fees the government decides to charge. Not the free lunch we had expected after the Chancellor’s initial announcement.”

It also warned that the continuing rise in house prices would “reduce the affordability of homes”. According to Halifax, house prices are up 3.9 per cent in the three months to June, compared to the same three months a year earlier.

However, the fund manager has factored a “UK Osborne boom” into its forecasts for the housing market.

This is based on the assumptions that housing demand rises causing double-digit house price inflation, which causes “spill-over effects to the wider economy, helping to boost hiring and business investment”.

However, Schroders says this is not its “central scenario”, as it believes rapid house price inflation and limited take up of the MIG scheme will strangle such a scenario.

Trinity Financial Service product and communications manager Aaron Strutt says: “I don’t think there’s any doubt that there will be a greater demand created by the second phase of Help to Buy with people stretching themselves to move up the property ladder and into bigger homes.

“Depending on how high the demand goes, we may very well see the greater effects felt by the wider economy.”

Recommended

Lloyds top again for FOS complaints

Lloyds Banking Group has emerged once again as the business group most complained about to the Financial Ombudsman Service, with the number of complaints against the bank up a massive 366 per cent year-on-year. The FOS last week published its latest complaints data about the businesses it received the most complaints about in the first […]

Hodge Lifetime launches lifetime retirement product

Retirement solutions provider Hodge Lifetime has today launched a new lifetime product aimed at borrowers entering or in retirement. The retirement mortgage is an interest-only lifetime loan which does not require capital repayment until the borrower dies or moves permanently into long-term care, although customers must pay the interest each month. The initial rate of […]

Second charge lending boosted

Second charge mortgage lending in the year to July was up 29 per cent on the previous year, according to figures published last week by the Finance & Leasing Association. In the 12 months to July, £394m of second charge lending was completed, up from roughly £305m in the same period a year earlier. Around […]

richardhurst

​Vizolution recruits Richard Hurst as marketing director

Vizolution has recruited former Trigold marketing manager Richard Hurst as its marketing director. Hurst has almost twenty years experience within the mortgage industry and has previously worked with Vizolution chief executive Bill Safran at Trigold. In his new role, Hurst will be charged with growing the business in the financial service sector and expanding into […]

Newsletter

News and expert analysis straight to your inbox

Sign up