Housing bubble is ‘top threat to Help to Buy’

Brokers and lenders are united in their belief that a house price bubble represents the biggest threat to Help to Buy’s success.

Research from the Intermediary Mortgage Lenders Association, which polled 300 brokers and 16 of its 20 members in July, shows 60 per cent of lenders and 59 per cent of brokers believe artificially inflated house prices are the biggest threat to the Help to Buy scheme. Imla members anticipate prices to rise by 2.7 per cent by the end of the year.

Brokers cite a lack of lender support and an over-reliance on Government funding as the second and third biggest threats to the scheme’s success, with 49 per cent and 38 per cent of the votes respectively.

Lenders put an over-reliance on Government funding and restrictions on lenders’ capital ratios in joint second, both with 48 per cent of the vote.

Imla executive director Peter Williams says: “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 with one hand and taking away with the other.”

Help to Buy is made up of a £3.5bn shared equity loan scheme for new-builds, which launched in April, and a £130bn mortgage indemnity guarantee scheme open to all properties, which will launch in January next year.

Mortgage Advice Bureau new homes director Andy Frankish says: “There is a distinct danger of a house price bubble. The only way we can control that is by all parties, and that includes brokers, lenders, valuers and developers, acting responsibly.”

Separately, think-tank the Adam Smith Insitute called on the Government to scrao Help to Buy and instead focus on ideas to improve supply such as abolishing affordable housing quotas and releasing more farmland for development.