George Osborne has also called a meeting of house builders and lenders, to discuss the finer details before the second phase of the scheme is launched.
The first part of the Help to Buy scheme, which helped those people wanting to buy new-build properties by giving them equity loans, was launched shortly after the last Budget. The second phase will kick in at the beginning of 2014 and will help people buy existing homes by guaranteeing part of their mortgage, thereby encouraging banks and building societies to lend more freely.
To benefit from the second phase of the Help to Buy scheme, homeowners will need just a 5% deposit and will be able to buy homes worth up to £600,000.
George Osborne has confirmed that both buy to let landlords and non UK citizens, without a history of owning properties in this country, will be excluded from the second phase of the scheme. Furthermore, he has said second home buyers will not be able to take advantage of the Help to Buy scheme.
Some of the biggest lenders in the UK, including, Lloyds TSB, Barclays, RBS and Nationwide are amongst the names to have been called to number 11, to receive further information about the scheme.
Representatives from the biggest house building firms will also be in attendance, with many admitting a further boost to the housing market could push them into building more houses, to cope with demand.
First phase success
The first phase of the Help to Buy scheme has been credited, alongside the Funding for Lending scheme which has reduced mortgage interest rates, with giving the housing market a boost.
Recent figures published by the British Bankers’ Association (BBA), revealed the number of mortgage approvals for house purchases rose again last month. In June, the number of mortgages approved hit 37,278, a 33% increase from the previous year, the number is also up from the 36,290 approvals a month earlier.
Figures from HM Revenue and Customs (HMRC) tell a similar story. With a rise in actual house sales to just over 89,000, the highest level since November and significantly up on the 75,350 sales in May last year.
However, some experts are concerned that the various schemes will create yet another housing bubble, pushing prices up, only to be followed by a steep drop, as we saw at the end of the last housing boom in 2008. There are even calls from some organisations, such as the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) to plan an exit from the scheme, even before it has really got going.
Graeme Leach, Chief Economist at the Institute of Directors (IoD) said: “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.”
Leach continued: “When the scheme is withdrawn any rise in prices that has taken place will be undermined, with potentially disastrous results. There is a real risk that the housing market will become dependent on the underwriting by government, making it very difficult politically to shut the scheme down. This should be of great concern.
He concluded: “The world must have gone mad for us to now be discussing endless taxpayer guarantees for mortgages.” (Source: BBC)
Could Help to Buy help you?
Many first time buyers and would-be home movers will be able to benefit from the Help to Buy scheme.