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Help to Buy scheme brought forward

Amid fears that the Help to Buy scheme, which offers 95% mortgages to homebuyers, would add to rapidly rising house prices. David Cameron recently announced the decision to bring forward its launch earlier than originally planned.

The second phase of the Government Help to Buy scheme, which was initially planned for a January 2014 launch, had been at the centre of the housing bubble debate in recent months. Industry experts expressing with some concern that a new batch of credit could overheat a market with limited supply. This decision to bring the scheme forward has had mixed reviews.

The third quarter of this year saw shares in the house building market underperform by around 11%, despite a strong start to the year. The early launch of the second phase could be beneficial to house builders and merchants, providing them with a buoyant end to the year.

Research firm, Liberum Capital, has estimated that around 20% more mortgages and 15% more transactions will occur as a result of the scheme.

David Cameron attempted to allay any fears in a recent interview on BBC One’s The Andrew Marr Show. He said: “Talk of a housing bubble to people here in Manchester or Salford, and they would literally laugh in your face.”

Alistair Elliot, senior partner at property advisers Knight Frank, expressed a similar view when he spoke to the Telegraph, he said: “Outside of London and the South East, there is no real prospect of a bubble at all.”

In justifying his decision to bring forward the scheme, David Cameron said he was “impatient” to get young people in the UK on the housing ladder and concerned that young people with “decent job prospects and good earnings” were still unable to buy even the most modest properties.

The first phase of the Help to Buy scheme was introduced in April this year and has arguably helped boost the property market by driving up sales. However, despite this and the Prime Minister’s confidence, concerns still exist. Both the Shadow Chancellor, Ed Balls and Business Secretary for the Liberal Democrats Vince Cable have voiced concerns that the scheme will “inflate the market” and result in “soaring prices” which could ultimately make purchasing a first home more difficult than it already is.

Julie Palmer

About the author

Julie Palmer

Regional Managing Partner

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Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.

Julie is a member of the Insolvency Practitioners Association and the None Administrative Receivers Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.

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