Help to Buy Set to End in 2016
The Government’s Help to Buy initiative has been responsible for increasing the number of house sales and housing prices. It has given a valuable helping hand to buyers who would not otherwise have qualified for a mortgage, and it has encouraged developers to build, knowing there is a market once they are completed.
Chief Executive Pete Redfern confirms the Help to Buy scheme has helped Taylor Wimpey start 2014 with a £1.2 billion pipeline of new orders: An increase of 27% year on year.
However the Help to Buy is scheduled to finish at the end of 2016, and while the Chancellor George Osborne has yet to comment on extending the programme the Bank of England opposes any extension of the scheme.
So if you can benefit from Help to Buy make sure you plan to move in the next two years to take advantage of the help on offer.
Market activity has increased dramatically, and with the second phase of the Help to Buy initiative now available to buyers, the issue in many areas is a lack of property for sale.
The Government is well aware of the link between a healthy housing market and economic recovery. The number of homes built in Britain last year was the highest since the start of the economic downturn in 2007. According to figures collected by The National House Building Council (NHBC) 133,670 homes were built in the UK in 2013, which is a 28% increase on 2012.
There have been signs of economic recovery for the UK as a whole, and of the housing market in particular. Mark Carney, Governor of the Bank of England, has recently delivered the Bank’s revised economic forecast. He is projecting growth of 2.8% in 2014.
The latest Land Registry House Price Index figures (published December 2013) show an annual house price increase of 4.4 per cent, which takes the average property value in England and Wales to £167,353.
As a buyer it is often seen to be best to buy on a rising market rather than a falling one, so you do not run the risk of falling into negative equity. This gives you options when you do need to move, as you will be building up equity in your home as the market rises.
Interest Rates linked to Unemployment figures
Chancellor George Osbourne had said that he would not consider raising interest rates until unemployment fell below 7%. Figures released by the ONS, the Office for National Statistics (ONS), show the number of people out of work fell by 167,000 to 2.32 million in the three months to November, which is 7.1%.
The chancellor’s original plan was to leave interest at the current low rate until 2016, and despite the sooner-than-expected drop in unemployment he may not make increases and risk slowing economic growth.
George Osbourne has not confirmed if or when he will raise interest rates, although if he does do so this will have an effect on mortgage payments, unless you have a fixed rate mortgage. Fixing your repayments on a mortgage will mean that your repayments will be higher than a flexible rate mortgage but you will be protected against any interest rate increases for the term of the mortgage rate deal.
Get Yourself Ready to Move
Mortgage approval rates are up 25% on a four year average according to Rightmove. In the nine months between January and September 2013 the rate of approvals increased to nearly 60,000. Rightmove attributes this increase to the Funding for Lending Scheme.
Funding for lending is a joint initiative between the Bank of England and HM Treasury to incentives banks and building societies to boost lending by reducing the cost of borrowing for lenders. Funding for lending was extended in April last year and will now run until January next year, although the focus on lending is moving away from mortgages and towards small businesses.
As a buyer you should take advantage of the increased mortgage approval rates. Seek advice from an independent mortgage advisor and shop around for the deal that will suit your circumstances.
Get your mortgage approved before you start looking for property to buy. That way you can be sure you are looking in the right price range. More importantly you can get the sale moving quickly once you have found the right property.
See ‘Don’t be the one who holds things up’ next week…