“Cutting the wait short for 95% government-backed mortgages will clearly give renewed hope to frustrated would-be homeowners across the country. The equity loan aspect of Help to Buy has been a resounding success and there is no doubt that the appetite exists for the new mortgage guarantee to fly off the shelves.
“That said, higher loan to value (LTV) mortgages have already become more readily available as funding has improved and competition intensified. In that respect the government needed to get the scheme out earlier to have any real impact. The first time buyer market in the UK has been driven off 95% LTV loans for many years so fully restoring that market will be helpful and should boost transactions.
“The announcement’s timing during conference season does make Help to Buy’s political purpose even more explicit in terms of boosting party morale and electoral prospects. While the Bank of England is preaching caution and careful monitoring of house price inflation, bringing the mortgage guarantee forward by three months opens the government up to accusations of pushing too far, too fast. But with central controls in place to deal with any downsides of the scheme, it should still be possible to manage this intervention successfully.
“Clearly we can expect that the state supported lenders will be the first to open for business and accept applications for the scheme. But with final terms and conditions still to emerge – not to mention costs – most lenders will need time to reflect before deciding what their offer will be. It is vital we guard against the assumption that all lenders will be able to accept Help to Buy applications from day one, which may result in even greater frustration from staff and customers across the country.
“It is also likely that we will see interventions in the scheme over its planned three year lifespan, so lenders and borrowers also face the uncertainty of regular changes in terms and conditions. IMLA members’ concerns about Help to Buy’s possible effects on house prices have been partly eased by the revised controls regime, but considerable uncertainties remain: not least because the housing market is now firmly in the party political headlights.”