March 11 (Bloomberg) -- The U.K. government will probably cut off a lending policy that lets homeowners refinance mortgages as house prices surge, according to a survey of mortgage lenders and brokers.
Three quarters of lenders expect the government to withdraw the Help to Buy 2 program from those seeking a home refinancing before it’s due to end in 2016, according to a survey by the Intermediary Mortgage Lenders Association. An early end was seen by 54 percent of brokers surveyed.
Part of the Help-to-Buy program enables purchasers to take out a loan with a down payment of as little as 5 percent on homes valued at as much as 600,000 pounds ($1,000,000). Refinancings are currently allowed under Help to Buy 2 for customers transferring their mortgage to a new lender.
“The overall Help-to-Buy scheme has delivered a much needed boost over the last 12 months and we would certainly be looking at a more subdued supply situation without it,” Peter Williams, IMLA executive director, said in a statement. “The evidence suggests that we have an entrenched mortgage market recovery which can survive its withdrawal.”
Chancellor of the Exchequer George Osborne has been criticized by lawmakers who say the policies are causing distortions in the housing market. U.K. house-price growth accelerated in February to the fastest in almost five years and Bank of England Chief Economist Spencer Dale said last month that officials are alert to the risk of overheating. U.K. mortgage approvals increased to the most since 2007 in January, the BOE said March 3.
Half of home-loan brokers and 46 percent of lenders expect the program to be withdrawn early from buyers who can only come up with a 5 percent deposit, the survey said.
“Help to Buy 2 has helped to reopen the higher loan-to-value market after the downturn,” Williams said. “There are few clearer drivers for more homes to be built than aspiring buyers returning to the market.”
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