New mortgage products emerging on the property market are set to severely challenge the popularity of Help-to-Buy mortgages, with many of the merits of the government’s flagship scheme being offered on top of the new offerings.
Prospective property owners now have a number of options available to them in order to enter onto the ladder as the level of competition to acquire new customers reaches a new high.
The new products have been released at a time when the Council of Mortgage Lenders have given a positive prognosis about the current complexion of the property market.
According to their statistics, gross mortgage lending increased to £17.6 billion last month, representing the highest it has been since 2008. Furthermore, the figure is 37% higher than it was last year and almost 10% higher than it was September, highlighting the extremely quick pace that momentum is moving at in the property market.
Market analysts have warned that current proceedings could culminate in a ‘bubble’ if measures were not taken to stop the market from ‘overheating’.
Products including a 95% loan-to value mortgages as well as a lower deposit threshold could be widely appealing to people across the UK. Many other mortgage lenders have deals that have very similar features but are limited with regards lending terms and loans sizes making them less widely applicable.
“The 95% mortgage is back,” said Aaron Strutt of mortgage brokers Trinity Financial. “There is now active competition for these mortgages.”
Mr Strutt did however highlight that people would only be able to obtain mortgages of this nature if their credit file was spotless and they were a proven reliable debtor.
The new offerings have raised doubts about the future popularity of Help-to-Buy mortgages with the new products appearing more affordable and beneficial.
Help to Buy was instigated earlier this year by the government in order to restore consumer activity and confidence into the property market. Many banks signed up to the scheme and have started offering mortgages with lower deposit requirements and high loan to values.
Despite the schemes acceptance within banks, no building society has joined the scheme with it thought that they are unwilling to part with money for the lenders fee that the scheme necessitates.
Chris Pilling, chief executive of the Yorkshire Building Society, said: “We support the intentions of the Help to Buy mortgage guarantee scheme in encouraging more lenders to provide lower deposit mortgages, but are able to deliver on its aims without relying on government support.
“House prices have stabilised and improved recently to make this the right time for us to offer such a wide selection of competitive 95% mortgages, and they address the toughest obstacle faced by first-time buyers, and some next-time buyers, which is raising a big enough deposit.
“Our fundamental role as a building society is to support, in a responsible and prudent way, as many people as possible achieve their aspirations to buy their own home.”
The biggest criticism of the Help-to-Buy scheme has been the affect that it has been having on property prices with many fearing that it will culminate in a ‘housing bubble’ across the country.
The concern is that by increasing demand in housing without increasing the rate of housebuilding, an artificial inflation in property prices is being risked that will eventually lead to property being even more unaffordable and out of reach than it was before.
Critics have called for more money to be spent on building houses in the UK, to ensure that supply meets demand and people aren’t left homeless.
Earlier this week, the British Banker’s Association urged Chancellor of the Exchequer George Osborne to create an exit plan for the scheme, so that all potential long term issues were prevented from happening.
The Building Societies Association chief David Cutter has called for measures to be taken to reduce the levels of demand in the country, to prevent the property market from heading towards a bubble.
“Ultimately, the only thing that that will be a counter-balance to unaffordable house prices, the factor that locks so many first-time buyers out of the market, is to build more homes,” he said.
“There has been a modest uplift in new housing starts, but nothing yet approaching what we need.”