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A helping hand builds foundations

Is the housing market really on a roll?

Scotland's average property price rose by £2146 in November, the biggest jump since June 2007, according to the latest survey by LSL Property Services.

According to Donald MacLellan, chairman of surveyor Walker Fraser Steele, part of LSL, the market is "powering ahead like a freight train" due to a "vast influx of first-time buyers".

A Halifax survey has found that 70% of Scotland's local authority areas are now affordable for first-time buyers, compared with 33% in 2007, when prices are measured against average earnings.

It seems that the Westminster and Scottish government schemes to energise the market are working.

The UK-wide Help to Buy scheme allows banks to use a government guarantee to cover 15% of a loan, reducing their potential loss if the buyer defaults on their repayments, thus encouraging them to lend on smaller deposits.

Royal Bank of Scotland, HSBC and Bank of Scotland are already in this market, which is not confined to first-time buyers, with Santander and Barclays having said they will follow suit.

Now the Post Office has also said it will join in, through its Bank of Ireland partner. It will also increase its number of branch mortgage specialists to 100, to deal with "ever-increasing demand for face-to-face consultations nationwide".

John Willcock, head of mortgages at the Post Office, said: "Joining the Help to Buy scheme is the latest in a series of steps to affirm Post Office as the go-to mortgage provider for those wanting to get their first foot on the property ladder."

However, mortgage expert Ray Boulger at broker John Charcol observes that Bank of Ireland, along with West Bromwich Building Society, has controversially raised its tracker mortgage rates for borrowers despite there being no change in interest rates.

He added: "When deciding which lender to offer their business to, borrowers may want to consider a lender's previous track record in treating customers fairly."

RBS has just opened its 95% loans under this scheme to mortgage brokers, which means the same deal is available from a broker as in a branch or on the phone. RBS has a two-year fixed rate deal at 4.99% with no fee, or a five-year fix at 5.49%.

Lloyd Cochrane, head of home lending at NatWest and RBS, said: "We've had lots of interest in our Help to Buy 95% mortgage products - the vast majority from first-time buyers - so it's clear that this scheme is making the difference for our customers in securing the home they need."

The bank says it has received 2484 applications under the scheme for £380 million in lending - for first and next homes - since October.

Lloyds is offering a two-year fixed-rate deal at 5.19% under the Help to Buy scheme, but applicants must hold a current account with the bank to get this rate, which also carries a £995 fee. For non-account holders the rate is 5.39%.

A more competitive market means that a growing number of 95% loans are available, sometimes at better rates, from lenders not using the scheme.

The best buys listed by comparison website Moneyfacts.co.uk include an HSBC fix to March 2016 at 4.79% and one at 4.99% to March 2019, which both have a set-up fee of just £99.

Clydesdale Bank has a 3.99% rate for 90% loan-to-value, and 4.99% for 95%, both on three-year fixed terms. They both come with no arrangement fee and £500 cash back. The bank's standard two-year 90% loan at 3.89% has a £999 fee, but it now has a fee-free version at 4.29%.

The Help to Buy (Scotland) scheme - which for some reason has the same name as the guarantee scheme and was launched at almost the same time last September - is a different proposition.

It is a £220m shared equity scheme, reducing the burden for buyers with a 5% deposit and a mortgage covering 75% of a property's value. The Scottish Government offers to advance the remaining 20% of the equity on homes worth up to £400,000, which can be repaid at any time but has to be repaid when the property is sold. It covers new-build properties only. The scheme is still getting off the ground, with Bank of Scotland, Nationwide, and Barclays the first to join.

Barratt Developments has already cited the impact of the scheme as a key factor behind its commitment to build 780 new homes in the west of Scotland in 2014.

But outside the south of England hotspots, there seems little danger of the government schemes stoking a bubble.

Barratt's David Scott said building rates are running at just 60% of their 2007 peak, and the industry has yet to rebuild capacity to its pre-recession level.

He also believes the political climate could act as a dampener, warning that a General Election and the Scottish independence referendum "may cause uncertainty for a period of time until the results are known".

Scottish agent Rettie & Co noted that in Glasgow, prices in real terms are at only one-third of the highs recorded seven years ago and in Edinburgh they are at 50%.

In Aberdeen, where average house prices have risen by 10% since 2012, the market is still 25% down on 2007 levels.

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