The British economy has exceeded the level it was at before 2007, when the first signs of the financial crisis reared its ugly head. It has been a struggle for many people to keep their heads above water during this period, but we have weathered the storm far better than many other countries. It is unfortunate that the poor have had to shoulder the burden of austerity, but that is what we come to expect from the behaviour many modern governments, and Parliament has proved no exception.
The housing market took a dive six years ago. Banks almost stopped lending money for mortgages entirely while supply had outstripped demand. It was obvious that one way to get the country back onto its feet was to stimulate the market. Mortgage lenders needed assurance that money they loaned was safe. They generally give you a loan fixing your credit score.
The banks decided to demand deposits of up to twenty percent before they would consider lending any money. Those who found an ideal property via estate agents in Skegness faced a seemingly insurmountable task of raising that sort of cash. The deposit on a two hundred thousand pound house would be a whopping forty thousand pounds. That is a staggering sum for most people, putting new home purchases well out of reach. The lenders and government also changed the qualification criteria for mortgages. Their personal finances came under greater scrutiny to ensure that they could meet the mortgage repayments. It was no surprise that the housing market almost ground to a halt.
Enter the Help To Buy Scheme. The government thought it up to assist people in affording the deposit for a new home. Under the terms of the program, potential buyers only need to find a five percent deposit and the country will provide them an online loan for the rest. After five years and when they are financially stable, they start to repay the rest of the deposit. It is a fantastic deal, and it was no surprise to see England’s wealthy abusing it to buy second homes, to much criticism from the public realm.
Over the next few years, the housing market boomed, and some of the largest developers report that they have built a record number of homes over the last twelve months. Now we find that property prices are rising quickly, and those in power as faced with more tough decisions as they find ways to calm the market.
There are several measures they might impose to slow the housing market. Here are a few of them.
- Put the Help To Buy Scheme on hold temporarily.
- Cancel the Help To Buy program.
- Raise interest rates.
- Make it more difficult to qualify for a mortgage than it is now.
I doubt that they will cancel Help To Buy, but expect them to put it on hold for a couple of years. The Bank of England is already toying with the idea of putting interest rates up which will likely be bad news for everyone, and it could affect, what is now, a healthier economy. The government is already looking at ways to make it harder for people to get a mortgage. It will widen the gap between the ‘haves’ and ‘have not’s’ even further; a subject that always seems to be on the agenda.
For those in the UK who have been putting off a home purchase; now could be the time to make the plunge. With these loan subsidies potentially in jeopardy, you might find that this time next year you will not qualify for the mortgage you need.