The Chancellor George Osborne certainly took everyone by surprise at the weekend with his big announcement on Help to Buy equity loans, with the extension of the scheme until 2020.
Help to Buy 1 has been a rip-roaring success, with the recent National Audit Office report showing 12,875 had been helped into homeownership and a further 9,600 had been approved in principle.
And with the extension, the Treasury is announcing that an extra £6bn will be available to build another 120,000 homes.
Clearly, the scheme is having a positive impact on house building and home ownership. But as Nationwide head of mortgage strategy and policy Andrew Baddeley-Chappell says in his Economic Tracker column this week, it’s not perfect.
Although Baddeley-Chappell wrote the column before Osborne made the announcement on the extension, he points out one of the key weaknesses picked up in the NAO’s report, namely that despite 11 lenders being in the scheme, Lloyds Banking Group and Nationwide are providing the majority of all the Help to Buy loans. Part of the problem is that lenders are reluctant to lend on new-build properties generally because of past experience of over-valuations.
The NAO says a concentration of this type could affect the provision of the scheme, for example, if any one lender were to decide to change its borrowing criteria or change its appetite for participation in the scheme.
Help to Buy 1 will now be a major part of the UK’s housing market for the next six years so it is vital that the Government and the wider market is alive to its current structural weaknesses.