Next phase of Help to Buy could potentailly harm British economy! More criticism has been levied at the Government’s controversial Help to Buy scheme – this time from the influential credit rating agency "Fitch Ratings". It has warned that the second phase of the scheme will push up house prices, thereby boosting margins for house builders and banks, but at the possible expense of the UK economy. The Fitch warning came as estate agency Cluttons raised its forecast for annual house price inflation in Greater London, saying that once the Help to Buy scheme is extended to all home buyers next January, it will bring more financed purchasers to the market but without an equivalent increase in stock. Fitch said that "January’s move to guarantee part of 95% mortgages on homes both new and old bought for up to £600,000 may push up prices without actually resulting in more new homes being built. The scheme, along with the initial phase that began in April, could have an impact on sovereign gross debt and its dynamics, particularly if there is strong pent-up demand as the tighter loan-to-value ratios that have prevailed since 2008 are relaxed.” The first phase of Help to Buy, which offers buyers of new-build properties only an interest-free, five-year loan for 20% of the property’s value, was launched in April. The second phase will offer £12bn of mortgage guarantees for buyers with only a 5% deposit. Fitch said that the main benefit for house builders from the second phase of Help to Buy will come from rising house prices, rather than increased sales volumes. It warns that developers might also not increase output because of the risk they may not be able to sell properties when they are completed. Fitch said it does not currently view Help to Buy as a threat to the UK’s AA+ rating, but that it “could potentially lead to higher contingent liabilities over the medium term”.
Posted on: Fri, 09 Aug 2013 16:44:10 +0000
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