The government’s Help to Buy scheme has been brought in with the aim to help first time house buyers with deposits. A number of Banks including HSBC, RBS and NatWest are now set to implement the new scheme throughout the UK.
This comes at a time when sales are reportedly the highest that surveyors have seen in just under 4 years. Many surveyors, according to the Royal Institution of Chartered Surveyors are predicting an increase in house prices, with some believing that the Help to buy scheme could drive up house prices even further.
Danny Alexander, the Treasury Secretary disagrees with these claims, stating that “People who think that there’s a housing bubble should get out more. They should get out of Kensington and Chelsea, and go to Manchester or Birmingham, and major towns across the country.” He went on to defend the scheme saying that it supports those who do not have “piles of cash”.
The scheme is anticipated to last for 3 years, providing help to those moving house and first-time buyers, who will be able to use the scheme for properties valued up to £600,000.
However some MPs are worried that the new scheme could raise house prices without careful consideration by the government. The Treasury Select Committee said the “Mistakes could distort the housing market or carry threats to financial stability.”
They added “We continue to believe that the government of the day will face strong incentives to extend the scheme, with the attendant risk that the mortgage guarantee scheme becomes a permanent feature of the UK mortgage market.”
Mr Osborne believes that the Help to Buy scheme would allow more people to get started on the property ladder; he also added that the UK housing market is now beginning to recover.
Shadow chief secretary, Chris Leslie scrutinised the upper limit of £600,000 for the scheme stating that “Unless George Osborne acts now to build more affordable homes, as we have urged, then soaring prices risk making it even harder for first-time buyers to get on the housing ladder. You can’t tackle the cost of living crisis without building more homes.”
Halifax will soon be offering mortgages with a rate of 5.19% costing £995 in fees compared to NatWest and RBS who offer no fees for a 4.99% fixed-rate mortgage for 2 years with the deposit amounting to 5%.
The scheme provides the opportunity for many who were not able to get into the housing market due to lack of funds to purchase their first home as rates for deposits are set to drop from 20%, which was set at the beginning of Britain’s economic crisis, to more affordable levels.