East Anglia: Persimmon reports strong sales, despite muted response to second phase of Help to Buy scheme
- Credit: Archant
Housebuilder Persimmon said today that the level of interest rates being charged on mortgages under the second phase of the Government’s Help to Buy programme are putting buyers off using the scheme.
Persimmon, which also includes the Charles Church and Westbury Partnerships brands, said the impact of the Help to Buy initiative offering a mortgage guarantee for buyers with low deposits had been muted since its launch early last month.
It believes the original equity loan scheme will remain most popular for buyers of new homes as the rates are “significantly more competitive” than those available so far with the guarantee.
The Government offers a guarantee of 15% of the loan to the lender under the second phase of Help to Buy, which is available on new and existing homes worth up to £600,000 and allows buyers with just a 5% deposit to apply.
But only a limited number of lenders have launched deals so far under the scheme and there are concerns the interest rates offered are still costly compared with mortgages requiring higher deposits.
Royal Bank of Scotland and NatWest are offering borrowers with a 5% deposit a two-year fixed rate deal at 4.99% or a five-year fixed rate loan at 5.49%, while Halifax and Bank of Scotland has launched a two-year fixed-rate loan for people with a 5% deposit with a rate of 5.19%.
Take-up may start to increase as more lenders enter the market and rates begin to reduce, according to Persimmon.
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The first part of Help to Buy, which launched in March, has given the property market a major boost and Persimmon said it has sold more than 3,000 homes under the initiative so far.
However, there are fears the scheme could fuel a housing bubble as prices have risen sharply in recent months. Figures from Halifax today revealed house prices surged by 6.9% annually in October as they continued to rise at their fastest rate in more than three years. A 0.7% month-on-month increase took prices to £171,991 on average, marking the ninth monthly rise in a row.
Persimmon, whose current developments in East Anglia include sides in Ipswich, Hadleigh, Colchester, Chelmsford and Saffron Walden, with Charles Church also building in Ipswich and Bures, said selling prices remained “firm” in all its regional markets and it had recently increased build rates to meet surging demand.
The group’s developments are fully sold for the current year and it has £650million of forward sales reserved, up 41% on a year earlier.