By Sean Toole
Property prices in the UK are rising at their fastest rate for several years causing concerns that the market is heading for trouble.
According to Britain’s largest mortgage lender, Halifax, house prices were 5.4% higher than in the summer of 2012. The increase in activity is being fueled partly by a recent initiative by the Government.
The mortgage guarantee scheme, which is designed to help first-time buyers and existing property owners move up the housing ladder, will allow borrowers with a 5pc deposit to buy property worth up to £600,000
Concerns are growing that the irresponsible lending seen in the past is set to return, although the Government have stated that this is unlikely to happen. For example, no interest-only and offset mortgages will be allowed.
Potential buyers will not be allowed to purchase second homes or mortgages for buy-to-let investors. There are also affordability checks in place that are there to ensure the days of reckless lending are avoided. The major banks and building societies have access to a £12 Billion pound pot for the guarantees within the program.
The scheme is expected to encourage lenders to offer more competitive rates, which will make it more attractive to borrowers.
So will it work? Probably, based on the evidence so far, although the jury is still out on this one. The scheme is expected to run until 2017.
Sean Toole
Sean Toole is the Host & Founder of the Sussex Property Networking Club based in Brighton. www.sussexpnc.com
Sean, otherwise known as the ” The Networking Ninja” also owns a successful property maintenance business serving clients in Hove, East Sussex.