View more on these topics

Lloyds chief says Help to Buy will not cause a housing bubble

Lloyds Banking Group chief executive Antonio Horta-Osorio has dismissed suggestions the Government’s Help to Buy scheme will create a new housing bubble.

Antonio-Horta-Osorio-700x450.jpg
Horta-Osorio: ‘Temporary scheme will not cause a housing bubble’

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.

In July, the Government-backed lender became the first and only lender to commit to the second element of Help to Buy.

Under the first part of Help to Buy, applicable to new homes worth up to £600,000, buyers put down a 5 per cent deposit and receive a 20 per cent Government equity loan, which is interest-free for five years.

The MIG element of Help to Buy is available for new and existing homes. The Government guarantees up to 15 per cent of the purchase price, at an as yet unknown cost to the lender, with the borrower putting down a deposit of between 5-15 per cent.

Some commentators believe Help to Buy and the Funding for Lending scheme, which offers lenders cheap funding in exchange for a promise to increase or maintain their net lending levels, are stoking a house price bubble.

According to the Halifax house price index, prices have risen 6.2 per cent, from £160,292 to £170,231, between August 2012 and August this year.

However, Horta-Osorio told the Financial Mail on Sunday he believes it “makes sense” for the Government to come up with a “temporary” scheme to combat the lack of availability of 95 per cent loan-to-value mortgages.

He says: “Help to Buy is the right thing to do at this time. It is harder to get mortgages above 75 per cent loan-to-value. I think, given that this market anomaly is just a temporary problem, it makes sense to have a temporary scheme.”

He adds the temporary nature of the scheme will ensure a housing bubble does not form and says it is “premature” to say there is currently a bubble when the price of the average home is down 14.7 per cent on its peak in August 2006.

He says: “The fact that it’s a temporary scheme will allow it to be withdrawn and not allow a housing bubble. Nobody wants a housing bubble, but it’s premature [to say we have got one] when house prices are below the level they were at in 2006.”

Recommended

Hunting-Houses-House-Home-Property-700x450.jpg
1

​Leeds launches 95% LTV exclusive with LSL Property Services

Leeds Building Society has launched an exclusive 95 per cent LTV product in conjunction with LSL Property Services. The new product is available to directly authorised advisers and representatives of Pink Mortgage Club, The Mortgage Alliance as well as First Complete and Pink networks. The three-year fixed rate is offered at 4.89 per cent and […]

Lending to first-time buyers up 31%

The value of residential loans advanced to first time buyers increased by £1.9bn over the past year to £8bn, an increase of 31 per cent.

HSBC promises to match or beat rivals as it launches a range of 90% LTV mortgages

Direct-only lender HSBC has launched a range of 90 per cent LTV mortgages and says it will match or beat similar deals offered by other major high-street providers. The offer ends on 3 November and the range aims to match or beat advertised deals offered by rival lenders Barclays, Woolwich, Halifax, Lloyds TSB, Nationwide, NatWest, […]

Rise in equity levels boosts second-stepper affordability but figures down over 10 years

Housing affordability for “second steppers” has improved in the 12 months to June, according to research by Lloyds TSB. In June housing affordability – calculated as the average price of a typical second stepper home less their current equity position – stood at 4.4 times gross annual average earning, an improvement on 4.9 a year […]

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments