Tweaks to H2B must be thought through

Simon Crone, vice president – Mortgage Insurance Europe made his warning following the OECD’s recent warning that the K must curb Help to Buy to restrain unhealthy demand in the housing market.

Crone said: “The housing market undoubtedly needs a strong hand on the tiller, but if the Help to Buy mortgage guarantee is to be tweaked, we must be absolutely certain it is going to have a material impact in the right areas.

“At the moment all the focus is on curtailing house price inflation, particularly in the South East. But the latest figures show the Help to Buy mortgage guarantee is predominantly helping first-time buyers in areas outside London and the South East, and at prices well below average levels – far beneath the top end of the market.

“The 2,500 mortgage guarantee sales¹ are a drop in the ocean compared with over 130,000 mortgage approvals across the whole market over the equivalent period.

“The London market also accounts for less than 5% of mortgage guarantee sales at an average of just £286,868, so it’s hard to believe the scheme is the prime culprit for driving house price inflation.”

But Crone added that any wholesale changes were unlikely to dampen house price growth.

“Any universal changes are unlikely to impact house prices, especially in South East hotspots, and may actually impact the very people – ‘Generation Rent’ – who see homeownership becoming an increasingly impossible goal.

“Nevertheless, we agree it is vital to address the uncertainties surrounding the scheme. Generations of first time buyers have relied on mortgages up to 95% to get onto the property ladder, and the range of products has greatly improved since the government guarantee launched.

“Help to Buy is a short-term solution to a long-term problem and we need a plan in place which does not rely on State intervention and looks beyond the end of 2016.

“There is a real danger that the lack of a clear exit strategy will further disrupt the market and dent home-owning ambitions. It is high time for government to look to the successes of Canada, Australia and others in using the private insurance sector to support a permanently available mortgage guarantee, which is sustainable in the long term and can assist first time buyers without unbalancing the market.”