There’s been lots of talk about the controversial Help-to-Buy scheme after the government brought forward its second phase. Some think it’s a bad idea and believe it will inevitably lead to a housing bubble and further price people out of the market, or lead to families not being able to move up the ladder. However, no one’s yet spoken about the buy-to-letters and how they will be affected. For example, the amount of buyers in the market usually decreases around November as the weather gets worse and Christmas approaches. This is judged to be the perfect time to pick up a great bargain. But with the introduction of the second Help-to-Buy phase, things could become difficult for those investors looking to snap up a great deal.
This is because HTB part two could have the same impact on the property market as part one. If it does, it’s likely that there’ll be a lot of demand over the next few months. As during this period supply will be relatively low, it could be harder to secure deals below market value. It could also lead to further inflation of prices, rather than the usual lull during the Christmas season. However, because the second phase of Help-to-Buy is rather different to the first, which only included new builds up to the grand price of £600,000; the result could actually be somewhat different. With the first phase, if you put down a five percent deposit, the government pledged to pay some 20 percent of the value of the property to the developer. This meant you would have needed a maximum loan-to-value of 75 percent to buy your home! However, the latest Help-to-Buy phase focuses on helping lenders offer 95 percent loan-to-value mortgages up to £600,000.
The problem with this is that it may not be very effective, because the interest rates on 95 percent mortgages are roughly 5.5 percent, but under the new scheme they are only five percent cheaper. Therefore, those who can already afford the interest rates are likely to already be in the market. For it to be a success it’s been argued that participating lenders should lower their rates.
So it could work out that the new scheme doesn’t have that big an impact on the market – well, not yet anyway. With Christmas coming up, many could wait until 2014 and simply rent until then. After all, there’s likely to be a flood of mortgage products onto the market to inspire tenants to start looking into buying but there’s no pressure to sign up immediately – house hunting has a somewhat different feel during the dark winter months! For many professional investors the next couple of months could remain a strong period for hunting down a bargain – only time will tell.