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Help to Buy scheme could be risk to property market

The Council of Mortgage Lenders has warned the government’s Help to Buy scheme could become another US mortgage crisis.

Chairman of the Council for Mortgage Lenders (CML) chairman Nigel Terrington has said the Help to Buy scheme should be a short term fix to correct the property market and not a long term feature.

In the US the government-backed Fannie Mae provided mortgages to US home buyers eventually leading to the financial crisis in 2007.

The UK government must avoid becoming addicted to the Help to Buy scheme which is available to first time buyers and home movers.

Lord Mervyn King also expressed misgivings about the scheme before leaving the bank of England as governor.

Help to Buy brought forward

Last month the government announced that the second phase of the Help to Buy scheme would be brought forward by three months which will benefit first time buyers and home movers.

The government would provide a guarantee to participating mortgage lenders of up to 15% of the property value to protect them from defaults and negative equity.

The scheme allows homebuyers to purchase properties valued up to £600,000 with only a 5% deposit and the balance is a 95% mortgage from a lender based on a multiple of the individuals income.

The Help to Buy scheme promotes new homeownership for people that are renting and is not available to switching remortgage buyers or buy-to-let investors.

Concerns of a new housing bubble have emerged with a combination of improving economic recovery, increasing consumer confidence and low interest rates fuel demand.

Bank of England

The governor of the Bank of England Mark Carney has been given the power by chancellor George Osborne to monitor Help to Buy and report on its impact by autumn 2014.

Help to Buy support has been extended from the original basis of new builds to any property and is due to end in 2016.

Critics have said the current rise in house prices is in part due to the scheme and there is a risk property prices will rise creating a new property bubble.

Help for first time buyers can come from family members as the equity release mortgage buyer can access cash and gifting the deposit for a new home to their children or grandchildren.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

Learn more by using the property value tracker chart, mortgage cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even gift to a family member or friend.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.

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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.


    Equity Release - Equity Released from your home will be secured against it. Mortgages – Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it. Think carefully before securing other debts against your home. The information contained in this website is subject to the UK regulatory regime and is therefore intended for consumers based in the UK.


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