Lenders fear new housing bubble most

NEARLY two thirds of lenders suggest that an artificial boom in house prices is the biggest threat to George Osborne’s Help to Buy scheme.

Both brokers and lenders think that a price bubble is most likely to jeopardise the policy, with 59 per cent and 60 per cent respectively citing it as one of the biggest threats.

Research released by the Intermediary Mortgage Lenders’ Association (IMLA) today also suggests that lenders expect house prices to have increased by 2.7 per cent by the end of this year. If the trend continues to 2016, when the Help to Buy scheme ends, prices will have risen by 11 per cent, back to levels last seen in 2007.

The IMLA’s Peter Williams commented: “If people are struggling to raise deposits in the current climate then a further 11 per cent increase in house prices will lift the property ladder even further out of reach for some”.

With mounting evidence of more activity in the housing market, PrimeLocation.com also suggest the number of properties worth over £1m that have to be discounted is falling. One year ago, 28 per cent of prime properties were reduced in price while on the market, while only 21 per cent are now.