With government financial schemes enabling the new house market to grow – make sure you don’t miss out on the modern construction opportunities.
The National House Building Council’s new home registration statistics showed that:
- The UK experienced the highest half-yearly total of new homes registered since 2008.
- 67,422 new homes were registered between January and the end of June 2013.
- The figures for Q2 2013 were up 38% compared to the same period last year, at 35,683.
Taken alongside the recent hike in mortgage approvals, which according to the British Bankers’ Association reached a 17-month high in June, the news appears to demonstrate the positive impact the first stages of the government’s £130 billion mortgage guarantee scheme is having on the house building market.
Help to Buy
The two-pronged scheme, dubbed Help to Buy, was set up to help potential homebuyers gain access to finance with government backing.
- It comprises on the one hand of an extension to the existing FirstBuy scheme, which sees Government take an equity loan worth up to 20% of the price of new homes worth up to £600,000, with the buyer putting in a minimum 5% deposit.
- And on the other, the forthcoming mortgage guarantee – to be introduced in January 2014 – is intended to open up mortgages on existing and new build homes worth up to £600,000, and is available to buyers who can stump up 5% deposits.
Although house builders have broadly welcomed the measures – Barratt Developments has said Help to Buy has increased the number of homes it is building by over 20% compared to two years ago – critics warn that it could have a devastating long term impact. Some claim that Britain could be on the brink of another ‘housing bubble’ similar to the one that precipitated the credit crunch in 2008. They question the sense of putting more public money into lending, which could do more to inflate house prices than promote the actual house building market.
World gone mad?
On the day Chancellor Osborne unveiled his plans to underwrite £130bn of mortgage lending, Graeme Leach, chief economist of the Institute of Directors said the world must have “gone mad” for us to be discussing endless taxpayer guarantees for mortgages:
“The housing market needs help to supply, not help to buy, and the extension of this scheme is very dangerous. Government guarantees will not increase the supply of homes, but they will drive up prices at a time when it seems likely that house prices are already over-valued. There is a real risk that the housing market will become dependent on the underwriting by government.”
However, Ministers insist that new rules governing the high loan-to-value mortgage guarantee scheme will ensure that only “responsible lending” takes place. The rules announced on July 23 state that:
- Anybody wanting to borrow money must be able to afford a mortgage and will be subject to income verification and stress testing, as set out in the Financial Conduct Authority’s (FCA) Mortgage Market Review.
- Borrowers will be unable to access guaranteed mortgages if their credit history does not meet FCA ‘impaired credit’ standards, including having a County Court Judgement over £500 in the past three years.
- The mortgage guarantee scheme will not be available to those wanting to buy second homes, and lenders will be required to collect a declaration stating that the borrower has no interest in a property anywhere else in the world.
- It will not be possible to use Help to Buy in conjunction with any other government scheme, including NewBuy.
- Housing developers are seeing a dramatic increase in sales as more and more new homes are registered in the UK.
- Thanks to the government’s Help to Buy scheme, more people are securing mortgages.
- The scheme has its critics, but the need for new builds leaves the house building market wide open for construction companies.