Earlier this month the governor of the Bank of England, Mark Carney, said that the housing market represented to the greatest threat to the stability of the UK economy. He said that the upturn in the market was too strong, pushing up house prices to make them unaffordable. He suggested that the government might have to scrap its Help to Buy scheme.
The government yesterday published its latest figures on the uptake of its Help to Buy mortgage guarantee and equity loan schemes and the construction industry has waded in to make sure there is no let-up in support for house-builders.
The figures show that 27,861 home-buyers have used the mortgage guarantee and equity loan schemes, with 94% of the take up outside of London. In London, where house prices are rocketing and the market does show signs of stress, fewer than 1,700 houses have been bought with Help to Buy.
The figures show that 85% of Help to Buy sales are to first-time buyers. Help to Buy is used on fewer than 3% of all home purchases.
The average house price is £151,597 for the mortgage guarantee scheme and £204,805 under the equity loan scheme.
James Hulme, strategic policy adviser for housebuilding at the National Federation of Builders (NFB), said: “The Treasury figures show that, far from creating a house price bubble, the Help to Buy scheme is helping to drive growth in the housebuilding sector while providing hard pressed first time buyers with the opportunity to buy their first home.”
Home Builders Federation executive chairman Stewart Baseley said: “After a number of years when house building levels fell to a record low level, all indicators show supply is now increasing rapidly.
“The Help to Buy Equity Loan scheme is supporting demand for new build homes – and if buyers can buy, builders can build. Its extension provides certainty about longer–term demand that will allow the industry to plan ahead, rebuild capacity lost in the downturn and ultimately deliver sustainable increases in supply.
“This is providing desperately needed homes and also creating tens of thousands of jobs on sites across the country and in the supply chain.”
House-builder Taylor Wimpey CEO Pete Redfern said: “Help to Buy Equity Loan has given more people the confidence and the ability to step onto or move up the housing ladder. It enables us to build more homes on the sites we have already got open, and has given us more confidence to invest in future sites and infrastructure which creates more jobs and economic activity locally.”
The Help to Buy equity loan enables people to buy a newly-built home with a deposit of at least 5% of the property price, while the government offers a loan of up to 20%. The rest is covered by a mortgage.
The mortgage guarantee offers mortgage lenders the option to purchase a guarantee on mortgages where a borrower has a deposit of between 5% and 20%. Because of this support, participating lenders are able to offer more mortgage products to borrowers with small deposits.
The Help to Buy Equity Loan scheme, the part of the scheme for new-build homes, has been extended up to March 2020 with a further £6bn – meaning the scheme is expected to support the construction of up to 200,000 new homes.
Commercial property adviser GVA said that Help to Buy has played only a minor role in London and so cannot be blamed for rising prices there. The regional markets where it has had the greatest impact are those where transactions and average prices still remain below peak levels. GVA said that two reasons why Help to Buy should not be blamed for risking a housing bubble in London are that buy to let or overseas owners cannot benefit from the scheme, and also that large swathes of the development market in London are exempt due to the Help to Buy policy’s upper price limit of £600,000.
“There is a defined and growing housing shortage in all parts of the UK, but removing or altering Help to Buy will not address this issue,” says Gerry Hughes, senior director of GVA’s planning, development & regeneration team. “The scheme remains part of the solution and has not become, as some critics suggest, part of the problem. House prices across Britain rose mainly as a result of improving economic performance and supply-side shortages, although exaggerated by Help to Buy in some areas.
“Rather than focus on Help to Buy, policy-makers should look to continue reforms to planning frameworks, increase land supply and help to deliver a large increase in affordable homes in a bid to address the supply-side problems of the housing market in certain parts of the UK. Only by increasing supply will overheating in London and the southeast be overcome.”