Low mortgage rates and Help to Buy scheme keep UK housing demand buoyant

23 March 2017

Continuing historically low interest rates – despite a small rise in US interest rates and marginal changes in UK lenders’ rates – together with the impact of the government’s Help to Buy scheme has kept demand for UK residential property high.

The Council of Mortgage Lenders predicts that property lending will rise slightly in 2017 compared with 2016, to reach £248 billion. “The mortgage market remains resilient,” said CML director general Paul Smee.

Forecasts for housing price growth vary between 2 per cent (Nationwide Building Society) and 3 per cent (Royal Institution of Chartered Surveyors), with construction activity remaining subdued, despite the £7 billion fund that the government made available to housing providers. In 2015/2016 construction began on just 172,080 homes, compared with the 250,000 new homes that housing experts believe will be necessary to cover the shortfall.

The government’s Help to Buy scheme, where financial assistance is offered to first time buyers, including a Help to Buy: ISA offering a 25 per cent top-up on savings, has assisted more than 150,000 buyers and contributed to buoyant demand for housing.

Launched in 2013, the scheme has been extended over the years and has encouraged mortgage lenders to offer products requiring low deposits, to cater for young first time buyers.