Warnings that housing demand may outstrip supply with launch of Help to Buy II

The Momentum UK Team 07 October 2013

More than 600,000 homes on the market are eligible for the second phase of the government scheme, with a predicted 1.7 million planning to use it, according to recent surveys.

The latest figures have led some commentators to predict that lenders will be flooded with pent-up demand - a recent survey from Santander found that 1.7 million people were planning to use the scheme.

The chancellor will announce the proposals on Tuesday, with some banks expected to start allowing loan applications within hours. David Hollingsworth of London & Country Mortgages said of the scheme:

“It is going to accelerate more people going into the market, so the number of mortgage applications will increase and that will put more pressure on lenders and their [loan] processing,”

“But in terms of gross [mortgage] lending we are about less than half where we were in 2007.”

Andrew Montlake from another lender, Coreco, said that a surge in demand fuelled by the media could lead to pressure on lenders, but would be met with stringent eligibility checks:

“A lot of people want to get on the property ladder and the lenders who come out with these products will be inundated with inquiries,”

“But lenders are not going to suddenly forget about being prudent, so people are going to have to qualify for the loans.”

Under the second part of this scheme, the government is making available £12bn in guarantees to lenders. However, just three banking brands have indicated they will be offering the new mortgage deals from the start of the scheme: these are Royal Bank of Scotland, its NatWest arm, and Halifax.

Rates have yet to be announced, but some banks have warned prospective first-time buyers not to expect cheaper mortgages, and financial commentators have made similar warnings. The first phase of the scheme applied only to new build properties, and some experts have called on the government to drop phase two over fears that it could artificially inflate house prices, damaging the economy in the long run.