The government’s Help to Buy scheme has been given a massive boost following statistics from the Department for Communities, indicating that the policy has invoked over 5000 new house sales in the past six months.
Furthermore, 92% of these purchases were made by first-time buyers, representing a huge success for the government in assisting young people enter onto the property ladder.
Implemented as three year policy, Help to Buy was first applied earlier this year and is formed of a two pronged approach to revive the property market and restore consumer confidence in house buying.
The first phase, the Equity Loan scheme, enables prospective home-owners to borrow up to 20% of the value of a new-build home, interest free for 5 years. Once this period comes to an end, they will then have to pay a 5% deposit in to purchase the house, though they will still be required find a mortgage provider to cover the other 75% of the property costs.
The second phase, the Mortgage Guarantee Scheme, grants property purchasers the ability to only pay a 5% deposit on any house worth up to £600,000. Then can then receive a mortgage with 95% loan to value, making the high costs of housing in reach of the average day consumer. Additionally, the government then guarantees the mortgages for any borrower with a mortgage over 80% loan to value, in case they are unable to make the payments themselves. It is thought that this insurance measure has contributed towards the widespread acceptance by providers, as they can expect compensation if their debtor turns out to be unreliable.
The Department for Communities also identified that the average price of a home brought through the scheme was £194,167, with the scheme benefitting the areas of Leeds, Reading and Milton Keynes the greatest.
The departments however only denote activity up until September, with the Mortgage Guarantee Scheme only being instigated during that month. The second phase has been far more controversial than its predecessor, with critics warning that the artificial inflation in property prices that it is causing will potentially culminate in a ‘bubble’.
House Building Boost
Despite the potential risks of the second phase, the Equity Loans Scheme appears to have been a great success thus far, with politicians and house builders alike praising the impact it has had on the property landscape.
Major house building company Taylor Wimpey have identified that they sold 100% of the houses that they had constructed this year, whilst government figures have illustrated that a monumental 18,000 houses begun construction in the initial 7 month period of Help to Buy.
“Today’s figures show we are building at the fastest rate since the crash in 2008, more people are securing a place on the housing ladder, and we are delivering tens of thousands of affordable homes across the whole country,” said Housing Minister Kris Hopkins.
“But there’s still more to do, and improving the housing market will remain a top priority. That means getting builders back on site, delivering new housing, more jobs and ensuring every hard working family has a place they can call home.”
Despite the apparent success illustrated by the statistics, Labour politicians have argued that more work needs to be done in order to bring the rate of house building closer to the growing rate of demand, in order to prevent a future ‘bubble’.
Shadow Chancellor, Ed Balls, argued that house building had long been a neglected practice in the UK, and has issued a caution about increasing demand at the rate it is currently moving.
However, the number of new homes completed has been at extremely low levels in recent years. Last year was the lowest number since the 1940s.
“The fundamental flaw in the chancellor’s current plan is to rely on securing lasting recovery by boosting housing demand, while failing to take any action to boost housing supply,” he said.
“If Help to Buy merely boosts demand for housing without being matched by action to increase housing supply, and then house prices will rise and rise.”
This year marked the first time that property sales exceeded a million in six years, though new houses only comprised a small portion of these figures.
Data from the Council of Mortgage Lenders have suggested that the recent upturn in the property market was a result of the new found accessibility of mortgages for borrowers, substantiated by the Help to Buy scheme.
Nevertheless, they have identified that there has been a ‘negligible’ impact on the second time buyers, arguing that the reduction in value of their current property during the recession has meant that they are unable to experience the benefits of Help to Buy.