The main question on every journalist’s lips this week seems to be around the Help To Buy scheme one month on. Has it worked, who is being helped, has it caused a house price spike and how can success be measured?
Of course, it is it is too early to tell for the scheme itself. With only two main protagonists actually having any products that can be accessed, only one of which brokers can get their hands on, success or otherwise will only really be attributed when there is a raft of choice.
At present it seems, as far as Halifax is concerned, that credit scoring is set somewhere on the “difficult” scale. We have had two good applicants with no credit issues, both earning in excess of £100,000 who have not got the required “score” for 95 per cent LTV but will happily be leant an unfeasibly large amount they have no need for at 85 per cent LTV.
Of course I do not blame the lenders for this. With no other competition in the broker market why the hell should they risk a torrent of business they cannot deal with, especially when systems are still being tested, after the Government’s ill-advised political move to bring the start date forward.
I suspect things will ease up once real competition is in place and then we can see the true effects.
The debate around house prices is far more complex. Whilst things are crazy in London and other pockets, the rest of the country still has some way to go to get even close to anything approaching a bubble. This does not mean of course that a bubble in London alone that bursts will be any less damaging, so an easy move would be to reduce the maximum £600,000 limit to something a little more sensible at the first opportunity at the very least.
What is hard to ascertain, however, is whether the introduction of the scheme itself has helped to persuade other lenders to introduce their own 95 per cent LTV products earlier than they may have done naturally. In other words, has the mere mention of Help To Buy 2 actually already done its job?
It is, of course, difficult to fathom whether or not lenders who are not using the scheme would have had the confidence to put their own schemes in place if Help To Buy had never been thought of but it does now give a real comparison to those who are thinking of using private indemnity firms such as Genworth.
For many, keeping things private rather than using a public scheme will be more beneficial and cost-effective, whilst for others there is a clear political and PR win in helping the Chancellor look like every first-time buyer’s rich Aunt Maude.
So no doubt the Chancellor will come out with a wide range of stats and figures that show how many people have already been helped, with a few beaming case studies, which is of course great. There will be some who are now the proud owners of a bright, shiny home who otherwise would still be paying rent to pay someone else’s mortgage off.
The problem, however, with any scheme such as this is that the true effects and success can only really be judged with the benefit of hindsight.
This is especially true when you start thinking of an exit strategy. The real test of the scheme may well be not how easy it is to get into, or how well it works initially, but how we get out of it safely.
Andrew Montlake is a director of mortgage broker Coreco