Property and mortgage experts have issued a slew of warnings about the dangers of Help to Buy 2, criticising the lack of mortgage choice and pricey rates.
Others have warned that the government is throwing a "jerry can full of petrol" on an overheating property market.
Steve Williams, mortgage expert at Gocompare.com, said: “It speaks volumes about Help to Buy that other major lenders haven’t signed up to the scheme yet. There is a definite sense that they are waiting to get some clarity on how the scheme will work and to see how many people apply for the mortgages.
“A 95% loan to value mortgage is very rare in the current market, but the rates on offer are still relatively high when you consider that there are other deals out there at the moment offering interest rates as low as 1.99% to 2.5% for a two-year fixed mortgage, if you have 65% to 75% deposit. This scheme isn’t a panacea for the housing market.”
Stephen Smith, director, housing & external affairs at Legal & General Network, said: "There are still many important questions to be answered around pricing. The likelihood is that mortgage rates will not start at the cheapest end of the spectrum and so those borrowers seeking to take advantage of the scheme should carefully plan to ensure they can afford it."
Oliver Atkinson, director of Urban Sales and Lettings, said: "Just as the housing market starts cooking on gas, along comes the government with a jerrycan full of petrol.
"The proponents of Help to Buy have the noblest of motives - making the dream of home ownership more achievable for everyone.
"But they are guilty of both pyromania and amnesia - fanning the flames of a housing boom and forgetting how badly burnt the market got just a few years ago.
"It's a case of right measure, wrong time. While the scheme should give a useful fillip to the modest growth being seen in northern England, in the South East it is too much too late. By inflating prices it could push homeownership further out of reach for even more people."
Other commentators were more supportive. Nigel Stockton, financial services director at Countrywide plc, denied it would lead to a bubble. "This is a credible and well thought-out government policy which was implemented for the benefit of the entire UK housing market.
"The people of Hull, Scunthorpe, Salford, Batley, Beverley, Truro and Cardiff still appear to have no voice in this 'bubble' debate. The fact that 95% mortgages will just begin to start their local property market again is welcome indeed for them."
Comments
Some expert! Firstly, re rate of 1.99 - 2.5% You mean LTV not deposit. Secondly to suggest that 5% is too high for a 95% product is just completely stupid. The only other 95% scheme available this year so far was 5.99%. I do not know many Professional Advisers who would consider 5% high for a 95% product.
Why are some so called professionals so keen to spread, ill informed, doom and gloom at a time when things are showing signs of improvement.