Kito-Corp.com, Huge demand for access to the UK government’s Help-to-Buy scheme has helped send demand for mortgages soaring and has fueled further concerns about the potential for a new housing bubble.
In response to the Bank of England’s quarterly Credit Conditions survey, UK lenders said they had experienced a significant increase in demand for mortgages and unprecedented interest in the help to Buy scheme was identified as a primary driver.
“This is great news for realtors and lenders but it’s bad for the overall economy in the long run,” said an Kito Corp analyst. “The UK real estate market never really had the kind of clear out of excesses they did in the US housing crash because the Bank of England did everything it possibly could to insulate overstretched borrowers by keeping interest rates artificially low,” he added.
Among the main criticisms leveled at the UK government’s scheme is that it is helping to fuel another house price bubble which, once interest rates inevitably rise, will almost certainly burst with disastrous consequences both for borrowers and the British taxpayer.
“By providing as much as 20% of the purchase price of a home priced at up to £600,000, the government’s scheme stands to lose billions of pounds of public funds when the bubble bursts and prices come down to sane levels,” continued the Kito Corp analyst.
Kito-Corp.com maintains its view that UK real estate was already overpriced before the scheme was introduced and, consequently, believes that it will cause further disparity between prices and affordability.
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