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Tuesday 21st October 2014

Speculation is rife about the effect the Government's controversial Help to Buy Mortgage Guarantee Scheme will have on the property market.

There’s talk of little else in the property circles of Exeter’s business community.

Speculation is rife about the effect the Government’s controversial Help to Buy Mortgage Guarantee Scheme will have on the property market, the second phase having been hastily introduced three months early. Prime Minister David Cameron made his surprise announcement at the Conservative conference and went on to reject fears of a housing bubble.

Clearly the need is there as would-be home owners have had a rough ride since the property market slumped in the 2008 recession. The tightening of lending requirements, with higher deposits and interest rates has made it very difficult for people to get on to the property ladder. And figures reflect that. Home ownership in England and Wales peaked at 69% in 2001 but has fallen to 64% in the last decade, according to the Office for National Statistics)

An Englishman’s home is still very much his castle and the vast majority of people in the UK still aspire to owning rather than renting their particular stronghold.

But now the Government’s Help To Buy Scheme is designed to give potential home buyers a helping hand, by bridging the gap for those with smaller deposits, giving them access to more competitive mortgage rates.

In a nutshell, to be eligible, you need to have at least a 5% deposit and be borrowing from one of the mortgage lenders participating in the scheme. The property must be in the UK, your only property and can be up to the value of £600,000. The scheme is available to both existing home owners and first time buyers.

With this ‘helping hand’ come the return of the ‘95% mortgages’ shock headlines and the prospect of an unsustainable boom in house prices. Both were factors that helped the wheels come off the property market last time around. Not all the banks and high street lenders have signed up to the scheme so far and the doubters believe the whole thing could just fizzle out.

But the benefit to the economy may only be shortlived. If this Help To Buy scheme pushes prices up, then longer term, that will push first time buyers back out of the market.

With a much more cautious attitude to lending generally, plus salaries not keeping up with inflation, the amount that people can borrow based on income is going to be constrained. That could just have the effect of pegging prices.

We will all be watching with interest to see whether the scheme is embraced by enough buyers and lenders to make a difference to the property market as a whole. Therefore, the speculation will continue for some time to come.

If you are considering a sale or purchase and need advice with your residential conveyancing, please call or email us for advice or for an estimate of charges: Rundlewalker Solicitors on 0800 015 2568. The following specialists are available to advise you:

Mike Giles, Solicitor: 01392 680228. mike.giles@rundlewalker.com
Gemma Lawson, Paralegal: 01392 209202. gemma.lawson@rundlewalker.com

But, whatever you do, act now! Rundlewalker, conveyancing solicitors for Exeter, Cullompton, Devon and Cornwall.

Also see our previous article introducing the Government Scheme.