The Home Builders Federation is warning the mortgage market faces a “perfect storm” in 2016 with the withdrawal of Help to Buy and funding for lending.
Funding for lending is set to end in January 2015 while the two Help to Buy schemes, announced in the March Budget, are set to last for three years. The shared equity loan scheme will end in April 2016 while the mortgage indemnity guarantee scheme, due to launch in January 2014, will stop in December 2016.
Mortgage rates have dropped significantly since the launch of funding for lending while the HBF says the shared equity scheme has started “like a train” with 4,000 deals since its April launch.
Funding for lending was initially due to end in January 2014 but was extended for an extra year by chancellor George Osborne in the March budget.
HBF director of economic affairs John Stewart says: “Depending on the environment in which it happens it will be a very unhelpful co-incidence. It seems significant that over 12 or 15 months the Government will have to manage the withdrawal of these schemes very carefully.
“You can’t cliff edge stop Help to Buy after three years because it would be a disaster and transactions could fall quite sharply. It’s always the case when we have a stamp duty holiday with a big surge before it ends and a crash afterwards.”
Association of Mortgage Intermediaries chief executive Robert Sinclair says the focus now should be on getting the schemes working and then work out how to end them safely.
He says: “There is an issue as they are artificial market stimulants that will come to an end. At least they are phased over some period of time rather than all ending together. Any one of those three could be extended is not more.”