With great fanfare the government has announced some recent changes to the housing policy and a guarantee scheme for 95% Loan to Value borrowers.
The first change is to what happens to profits made from tenants buying their council houses. These are to be used by local authorities to help build new council houses.
At the same time councils are to be given incentives and subsidies to refurbish neglected and empty properties.
On its own, this is unlikely to result in a huge leap forward in the housing market but it is an encouraging move in the right direction.
The second, major, announcement was the launch of the mortgage guarantee scheme. Based upon the Mortgage Indemnity Guarantees of the past, this new guarantee is specifically targeting new build properties only and homebuyers who have been struggling to borrow a 95% LTV mortgage.
Essentially it is insurance, funded by the house builder and the government, to protect lenders should house prices fall further.
In time this should certainly make it easier for borrowers to get the desired mortgage and encourage a few more deals. The knock on effect will be to help the large house building firms in particular and to get some of the large new housing estates moving again.
For the majority of homeowners the impact will be negligible or, at least, much slower. For those living in existing properties it is unlikely to create a sudden surge of activity at the bottom rung of the ladder as the target audience for the guarantee are ‘new build’ purchasers.
In short these announcements are good news for house builders and first time buyers on ‘new build’ estates, but it is unlikely to help the mortgage and housing market as a whole.