Audit office of the government gives fair warning regarding the decline in equity values that will knock out loan records.
Boosting the home ownership through the help of the government scheme has lead the authority to relevant market risk. In addition, this scheme had been utilized by some buyers as a risk which may lead to negative equity. Based on the data of the National Audit Office, with an estimated figure of around 70 percent of individual who used this scheme can buy properties without the assistance of the Help to Buy program of the government. Moreover, around 20 percent securing that from the government were not first timers. This create impact of economy to corporate credit.
What is Help to Buy Program?
“Help to Buy” is a program of the government introduced in 2013 in UK by the coalition party of David Cameron. The main goal of this program is primarily to help more individuals to land on the equity ladder. However, political critics insist that this so-called program of the government has diffused the prices of the equity and at the same time the revenue of the house builders. On the other hand, the shortage problem regarding affordable homes experienced failure in fixing it.
The “Help to Buy” program permits home buyers to render a deposit of as low as 5% on a newly build home. Subsequently, the buyer will have to receive an equity loan provided by the government to wrap the 40% of the equity value or the 20%. Traditional mortgage will cover up the balance from the equity loan which will be computed by the equity release mortgage calculator.
Help to Buy’s Total Investment
Since April 2013 until December of 2018, the “Help to Buy” program already catered 211,000 loans through the help of the Ministry of Housing and the Communities and Local Government. As estimated end date of the program, the “Help to Buy” scheme will end by 2023 in which the loan is also expected to peak. This program just opened the government to relevant market risk in case the equity values decrease. Moreover, this ties up an important financial capacity for the public.
Further, the government is expecting to regain its total investment rendered to this program by the year 2032. However, a reduction in the equity market could strike the value of its loan book. In addition, the auditor also gave warning that other buyers who used the scheme are also wanting to sell their properties. Afterwards, they also find their selves having equity of negative value.