New analysis by mortgage insurer, Genworth, has revealed that Wider and more efficient use of Help to Buy 2 could support an extra 200,000 first-time buyers, restoring the first-time buyer market to pre-recession health.
George Osborne originally pledged the scheme would enable up to £130bn of lending over three years, equal to £43.33bn a year. Yet Genworth’s analysis of industry, government and regulatory data shows Help to Buy 2 supported £5.76bn of mortgage lending in 2014, just 13% of its potential capacity.
Last year’s £5.76bn therefore left a shortfall or ‘spare capacity’ of £37.57bn.
Better use of Help to Buy 2 could return first-time buyer numbers to pre-recession levels
This spare capacity has the potential to restore first-time buyer numbers to the long term norm seen before the recession. Last year’s average Help to Buy 2 loan was £147,378, meaning an extra £37.57bn of lending could enable 255,415 more house purchases. When you consider that first-time buyers account for 78% of Help to Buy 2 customers, this is equal to 199,224.
At present however, first-time buyer activity remains well below its long-term pre-recession average. 311,400 first-time buyers bought their first home using a mortgage last year – including around 30,000 using HTB2 – compared with over 500,000 a year from the mid-1980s to early 2000s. If Help to Buy 2 was able to boost these figures by 200,000 this would herald a return to the figures seen throughout the peak years.
Simon Crone, vice president for mortgage insurance – Europe at Genworth, commented: “At a time when hopeful first-time buyers face multiple challenges to reach their goal of home-ownership, it seems unacceptable that Help to Buy is not maximising its capabilities to help more achieve this aim.
Given low rates of house building, 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 house building 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.
Yet a major challenge remains; the current scheme holds little appeal to building societies and is being overlooked by banks at 85% and 90% loan to value (LTV) where loans are going unprotected. If the next government is serious about supporting home ownership in the UK, it must work with the private insurance sector to bed a permanent mortgage guarantee into the market for the long haul, with terms that are more appealing to lenders to encourage wider uptake.”
Article Source: www.propertyreporter.co.uk
