Is Help to Buy actually helping?

Published: 13/11/2013

We’re over a month into the second phase of the government’s Help to Buy Scheme so Lynne McCaffrey casts her expert eye over the impact the initiative has had on the property market and if critics are right to be wary.

“There is a lot of love in the air for the Help to Buy scheme from customers. Understandably the government has been quick to publicise the positive feedback it has received from now soon-to-be homeowners with terms such as ‘dream come true’, ‘benefits hard working people’ and ‘able to buy much earlier than anticipated’ banded about.

“And who can blame them; so far more than 2000 people have put in offers on properties under the scheme which, in turn, has resulted in £365million of new mortgage lending. Just a matter of weeks in and ten of these applications have already completed so it would seem the market is moving and in areas which need it most.

“More than three quarters of the applications have come from outside London and South East and over 75% are first time buyers who, we all agree, are the foundation of any solid property market. However there are some concerns surrounding the long term stability of this foundation.

“With the Bank of England base rate remaining at its historical low rate of 0.5% and expected to stay put until 2016, interest rates are unusually low. In fact we have seen two year fixes reach record lows this summer and five year fixes not far behind. This therefore raises the question of long-standing affordability when interest rates inevitably rise.

“In order to maintain the positive impact of Help to Buy it is essential all new buyers consider the long term financial commitment of owning a property. A professional mortgage broker will be able to advise buyers on this and help ensure, as much as is possible, their ability to sustain repayments in the coming years.”

Content correct at time of publication