Will Help to Buy spark the housing market in to life?

Image of terraced houses
Terraced houses, yesterday
"Even if you haven't got a large deposit you still need to shop around, examine the market, get some expert advice and make sure that this is the right mortgage for you" Steve Williams, Gocompare.com
  • | by Kristian Dando

If house prices are anything to go by, the previously stagnant housing market may well be showing signs of life.

According to the Office of National Statistics, average house prices have hit heights not seen since before the financial crash, at around £247,000. But this is skewed by the London market, where the average house price has risen by a positively whopping 8.8%.

To put that in perspective, Wales and Northern Ireland’s average house price rose by 1% and 1.1% respectively, while in Scotland, the average house price actually fell by 0.7%.

But on the whole, demand for houses is up.

The second phase of Help to Buy, which commenced this month, is likely to drive up demand even further, with mortgages of up to 95% of a home’s value more readily available than any time since before the squeeze on lending began.

It’s not just available to first-time buyers, meaning those looking to move or remortgage can get in on the action.

However, there has been concern as to whether the Help to Buy scheme, which offers guarantees on 95% mortgages on properties worth up to £600,000, will encourage people to overstretch themselves financially and potentially create another housing bubble.

Lenders are also offering customers low-deposit mortgages outside of the Help to Buy scheme. Earlier this month, both Yorkshire Bank and Clydesdale Bank launched their own 95% mortgages, which are unconnected to Help to Buy.

Steve Williams, mortgages expert at Gocompare.com, says: "It speaks volumes about Help to Buy that other major lenders haven't signed up to the scheme yet. There is a definite sense that they are waiting to get some clarity on how the scheme will work and to see how many people apply for the mortgages.

"Even if you haven't got a large deposit you still need to shop around, examine the market, get some expert advice and make sure that this is the right mortgage for you. But, if you have already saved as much as you can for your deposit, and a 95% mortgage won't stretch your monthly outgoings, then Help to Buy is definitely worth considering, but go in with your eyes open. This scheme isn't a panacea for the housing market and it may not be for you either."