Mortgages  

Gov’t should use Help-to-Buy spare capacity: Genworth

Gov’t should use Help-to-Buy spare capacity: Genworth

Some £37bn of spare capacity in the Help-to-Buy mortgage guarantee scheme could be used to support an extra 200,000 first-time buyers and reinvigorate the market, according to analysis by mortgage insurer Genworth.

Simon Crone, the firm’s vice president for mortgage insurance, Europe, said that although chancellor George Osborne had pledged £130bn of lending over three years, equal to £43.33bn a year, the scheme had only supported £5.76bn of mortgage lending in 2014.

He said that this left a shortfall of £37.57bn which, if used, could provide a significant boost to the first-time buyer market.

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According to the analysis, the average loan supported by the scheme was for £147,378, meaning that £37.57bn of lending could enable 255,415 more house purchases.

Mr Crone said: “Given low rates of housebuilding, it is perhaps a blessing that the market has not been flooded by an extra 200,000 first-time buyers overnight.

“But if careful steps are taken and it is paired with greater housebuilding to guard against house price inflation, our analysis shows that Help-to-Buy could help restore the first-time buyer market to its former glory.”

Mr Crone noted that 311,400 first-time buyers bought using a mortgage in 2014, including approximately 30,000 using the scheme. This compared with more than 500,000 a year from the mid-1980s to the early 2000s.

The analysis also found that mortgage lending to buyers with small deposits became increasingly dependent on the scheme in 2014.

Richard Sexton, spokesman for LSL Property Services, said: “Activity was certainly more restrained in the months running up to the general election. Yet any past gloom only improves the prospects of a rebound in momentum.

“Now a clear majority government has been established, confidence has returned to the market. With the election done and dusted, and demand certainly bolstered by extensions to schemes like Right-to-Buy, the only major snag in the fabric of the housing market remains the fundamental flaw of a lack of new homes.”

Key points
The Help-to-Buy mortgage guarantee scheme could have spare capacity of £37.57bn based on previous pledge
If used this could enable 255,415 extra house purchases supported by the scheme
This could help restore the first-time buyer market

Source: Genworth

Adviser view

Ray Boulger, senior technical manager for London-based John Charcol, said: “I doubt the government expected all of the funds to be taken up. It is better to have this amount not being fully used than the funds running out.”