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Written by rosalind renshaw

Fears of a housing market bubble stoked by the Help to Buy scheme are pure “hysteria”, says a leading think-tank.

The stance taken by economic group the EY Item Club is, howevr, sharply at odds with Lloys which this morning warned of a dangerous bubble in house prices unless steps are taken to lift the supply of new homes.

Meanwhile RBS revealed that as soon as the Help to Buy mortgage indemnity scheme went live, demand shot up: RBS reported booking 5,000 mortgage appointments within the first three hours.

Item has shrugged off housing market speculation, but is forecasting that the economy will grow by 1.4% this year, 2.4% next and 2.6% in 2015.

It says the economy will be helped by the housing market recovery, which will boost spending on household items and professional services such as conveyancing, and drive GDP growth.

The group, formerly the Ernst & Young Item Club, believes that the housing market will enjoy a bounce, rather than undergo a boom.

“Buy-to-let and other cash-rich buyers have had the market to themselves until this year, but Help to Buy will help level the playing field for first-time buyers and low-equity households,” Item said.

It predicts there will be over one million housing transactions this year, with house prices up 3.5% on last year. It forecasts house prices to rise 6.5% in 2014.

The group does not believe the Help to Buy mortgage scheme will fuel a housing bubble. Instead, it calls it “well-timed and targeted”.

Peter Spencer, chief economic adviser to the group, said: “Despite recent criticism of these initiatives, the chances of seeing another housing market bubble are extremely slim.

“House prices and transactions are only just recovering from the credit crunch and will be  paltry in comparison to those of a decade ago.”

Comments

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    Even if house prices outside London are not getting the feel good factor that's no reason to start bolstering them up using 'Help to Buy' etc. It's the 'marketing of each property' that needs improving - not better financial marketing.

    • 02 December 2013 08:25 AM
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    " Wardy:
    I was hoping to get a chance to discuss the business merit in offering clients 'Moving Contracts' as an alternative to your existing agency 'Selling Contracts', in order to help the housing market to recover its momentum or throughput"

    Why??

    You have slunk away from EVERY OTHER "discussion" you start - so why start another one to run off crying to Mummy when no-one wants to play with your flat, raggy ball?

    Get real, man.

    • 16 October 2013 09:30 AM
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    Wardy,
    Reading the earlier post again, I see what you mean. There's definitely something wrong there!

    • 15 October 2013 18:23 PM
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    Wardy:
    I was hoping to get a chance to discuss the business merit in offering clients 'Moving Contracts' as an alternative to your existing agency 'Selling Contracts', in order to help the housing market to recover its momentum or throughput?

    • 15 October 2013 18:21 PM
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    Peter,
    Email Roz and ask her to edit your post because half way through your first paragraph I found myself agreeing with you but then you went and ruined it because you cant resist the temptation for a pop at agents.

    ''Now if agency fees could be tagged to house prices in some way''

    That must be a joke, don't you yourself charge a fee completely unrelated to your performance and house price where as my fee is based solely on those factors?

    • 15 October 2013 09:38 AM
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    This Help To Buy thing is actually quite dangerous.

    If you read the fine print, then after 5 years you start paying interest as follows:

    base rate + RPI + 1% for every year over 5 years.

    In year nine (so 2023) your "government sponsored" second mortgage will be costing you the best part of 10% APR. This assumes base rates go back up (which they will) and RPI stays where it usually does.

    If you get a good pay rise, you can buy them out. If you don't then your going to be stuck.

    If the banks change their income multiples you're going to be stuck.

    If deposit requirements stay the same (likely) then you are going to need a 30% rise in the value so that you can afford to buy them out.

    The terms and conditions even state that the reason for this ratchet system is to force people to buy themselves out of it.

    Looks like a whole load of misery to me.

    • 14 October 2013 14:47 PM
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    Idiot, "Now if agency fees could be tagged to house prices in some way", they are by charging a % of course.

    • 14 October 2013 12:39 PM
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    Are they totally bonkers, or have I missed something here? How can everyone having to mortgage themselves to the hilt, (to keep a reasonably desirable roof over their heads,) and resulting in them having no liquidity for spending in the shops for years-to-come, help with boosting spending? It cannot help boost spending on household items, or even professional services such as conveyancing, and cannot drive GDP growth because what people will have left for that will be diddly-squat. It's back to school - you lot.

    It's more like the effects of carbon capture. Locking money up in the nation's real estate, results in no-one being able to spend any of it, (on the fair assumption that all the land and buildings in the country continue to be owned by 'someone')!

    Now if agency fees could be tagged to house prices in some way, then certain folk may just be able to see benefits for themselves of course. It has to be said.

    • 14 October 2013 09:05 AM
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