The Help to Buy effect

House prices have grown 5.4 per cent from the previous 12 months, the latest figures from the Office of National Statistics (ONS) show.

This comes shortly after the government launched its Help to Buy scheme. In November, statistics showed that in the scheme’s first month alone, more than 2,000 people had put in offers thanks to a Help to Buy mortgage – that number has now trebled to more than 6,000.

The Mortgage Advice Bureau announced homebuyer deposits fell by 6 per cent in Q4 2013. It said initiatives to boost high loan-to-value (LTV) mortgages to UK customers helped bring down the average deposit for buyers. The typical homebuyer applied for a mortgage with a deposit of £66,259 in December 2013 – £4,106 less than in September before Help to Buy launched.

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The mortgage broker added that, with average purchase prices growing by 1 per cent from £228,882 in September to £230,372 in December, the typical LTV ratio rose from 69.3 per cent to 71.2 per cent, indicating a growing number of mortgage applicants with smaller deposits.

In recent months, many providers have announced plans to join the government scheme, for example, Santander, Barclays, Virgin Money and the Post Office.

The increase in interest in home buying is sure to bring to attention the need for financial advice – particularly in the run up to the Mortgage Market Review (MMR) in April.

Nick Harris, managing director of independent mortgage broker, Centric Mortgage Finance, said, “A number of lenders have advised us in recent weeks that one of the repercussions of the Mortgage Market Review will be a reduced appetite for new business during the implementation period, for logistical reasons.”

“This could result in a temporary increase to rates as lenders look to temper new business levels,” he added. “I would anticipate this reducing loan volumes and restricting house price growth over that period. If you are planning to remortgage or take out a loan, it may be worth doing so sooner rather than later.”