Help To Buy: Lloyds Boss Questions Scheme

This article by Yahoo! news UK & Ireland on October 14th, 2013 reveals the viewpoint of Britain's biggest mortgage lender about Help to Buy that it might create bubble in property prices.

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The chief executive of Britain's biggest mortgage lender says he fears Help to Buy could create a dangerous bubble in property prices - just weeks after giving the Government's scheme his unequivocal support.

Antonio Horta-Osorio - head of Lloyds Banking Group - told the Financial Times that unless steps were taken to increase the number of new homes being built, there was a risk of a "substantial increase in house prices."

He said the scheme should also be tweaked to focus "outside London and the South East", while planning and building rules should be relaxed.

The Lloyds boss also called for more social housing projects so that rising mortgage approvals do not drive up house prices.

Just six weeks ago, in an interview with Sky's business presenter Jeff Randall, Mr Horta-Osorio described Help to Buy as "absolutely the right thing to do."
 
The Halifax, which is owned by Lloyds, is a major lender under Help to Buy, which was recently extended to include a Government guarantee on high-risk mortgages, allowing people to buy a home with a deposit of just 5%.

Mr Horta-Osorio made his comments as a leading forecaster said the efforts to revive the mortgage market had been "well-timed" and would not lead to another housing market bubble.

The Ernst and Young ITEM Club believes house prices will rise by 3.5% across Britain this year and by 6.6% in 2014.

The boss of Britain's so-called 'bad bank' also fuelled the debate by suggesting that Help to Buy could speed up the repayment of its £42bn taxpayer loan by lifting house prices.

Richard Banks, who runs UK Asset Resolution (UKAR), which manages the loans of failed lenders Northern Rock and Bradford & Bingley, said this could help lift customers out of negative equity - where loans exceed the value of their homes.

In an interview with the Times, he said: "If house prices go up outside London, it is a good thing for us as quite a few of our customers are trapped by their high loan-to-values.

"If higher house prices mean sufficient customers are able to and choose to remortgage with another mortgage provider, it may facilitate UKAR being able to pay off the Government loan more quickly."

While support for Help to Buy has been strong, so too has opposition with former Bank of England governor Lord King and the International Monetary Fund urging caution.

Recent official figures showed mortgage approvals running at a five-and-a-half-year high in August, while data from Nationwide showed house prices rose at their fastest annual rate in more than three years in September.

The strongest growth remains in London and the South East.

Lenders including Halifax, RBS and NatWest have started offering mortgages under Help to Buy while Santander, HSBC, Barclays, Virgin Money and Aldermore also plan to join it.

The scheme is expected to offer £12bn in mortgage guarantees over three years and some estimates suggest 180,000 loans could be taken out under the initiative.

Article Source: http://uk.news.yahoo.com/help-buy-lloyds-boss-questions-scheme-101121891--finance.html#SU0xXFM

Renting Cheaper Than Buying in London, the South East and Scotland

According to this interesting article by Nicole Blackmore of The Telegraph on August 31st, 2013 renting is cheaper for first-time buyers in London especially in South East and Scotland than buying property.

Inflated house prices mean mortgages are less affordable than renting for many, even with a 20pc deposit. 

It is cheaper for potential first-time buyers in London, the South East and Scotland to continue renting than to purchase property thanks to rapidly rising prices.  

New research from mortgage lender Santander shows inflated house prices in London mean potential first-time buyers would need to find an additional £478 a month to buy, sparking fears that more people will be priced out of the market.

The average monthly mortgage repayment for first-time buyers in the capital is £1,342, compared to the average monthly rent of £864.

Data released by the Council of Mortgage Lenders this week showed first-time buyers in London are having to stump up a record £64,000 average deposit just to get on to the property ladder.

In the South East the average first-time buyer would have to pay £56 more a month to buy a property than rent, with this figure rising to £84 in Scotland.

However, renters living outside these three areas who have a 20pc deposit could save an average of £1,740 a year if they buy their own property.

The average monthly rent in the UK, excluding London, the South East and Scotland, is currently around £480 compared to monthly repayments of £335 for the average first-time buyer – a saving for homeowners of £145 a month.

The research into typical first-time buyer properties found the average price across the country, outside of London, South East and Scotland, is £85,955. This means that a first-time buyer applying for an 80pc loan-to-value mortgage would require a deposit of £17,191.

Phil Cliff, director of mortgage marketing at Santander UK, said: “When we first conducted this research in 2010, London was the only UK location where it was cheaper to rent than buy. Now, a demand for housing and rising house prices has seen both the South East and Scotland join its ranks.” 

Article Source: http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10274296/Renting-cheaper-than-buying-in-London-the-South-East-and-Scotland.html