A doubling in the take up of Help to Buy mortgage loans was hailed by David Cameron as a much-needed boost for hard-pressed homebuyers.
A doubling in the takeup of Help to Buy mortgage loans was hailed by David Cameron as a much-needed boost for hard-pressed homebuyers.
The prime minister said the Treasury-backed mortgage guarantee scheme attracted 4,000 applicants last month compared with 2,000 in November.
With Barclays and Santander preparing to sell Help to Buy-compliant mortgages this month, joining Lloyds, Royal Bank of Scotland and HSBC, the scheme is expected to expand rapidly this year.
Cameron said the 6,000 applicants would need £1bn of state support, though only 750 transactions had so far been completed. He said: “The new year is often a time when people look to make those big life-changing decisions like moving home or taking that first step on the housing ladder.
“But too many people have found themselves frozen out of the market in recent years as a result of the size of the deposit required.
“That is why as part of our long-term economic plan we introduced the Help to Buy scheme, so hardworking people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.”
Speaking a day after official housing figures confirmed London’s house prices had jumped 10.6%, compared with an average of 3.2% across England and Wales, Cameron said most applicants were buying outside the capital. He said 80% were first-time buyers.
Analysts predict that house prices will continue to rise during 2014 as the rocketing demand for homes outstrips a more measured increase in house building.
Supporters of Help to Buy maintain that house sales remain well down on the 130,000 registered at the peak of the previous boom in 2006 and large parts of the UK economy are dependent on a healthy housing market. The number of monthly home sales has jumped by a quarter since the start of last year, though to only a little more than 90,000.
The scheme gained cross-party support following its launch last year after the shadow chancellor, Ed Balls, said he favoured using state funds to overcome the weakness of the UK’s banking sector.
Most lenders have remained resolutely conservative in their lending policies since the 2008 financial crash and have favoured homeowners with large amounts of equity in their homes over first-time buyers.
Under the second leg of the scheme, launched in October, the government guarantees part of the mortgage for a home worth up to £600,000 for buyers with a deposit as low as 5%. The Treasury has set aside £12bn which it believes will help underwrite £130bn of new mortgages.
The business secretary, Vince Cable, has consistently warned that the scheme could fuel another house price boom. In an interview on the BBC before Christmas he said: “We certainly need to look at that [scheme] again. It was conceived in very different circumstances.”
Some economists have been even more vociferous in their criticisms, with one rightwing thinktank describing Help to Buy as “mad”.
Graeme Leach, chief economist at the Institute of Directors, said last year the housing market needs “help to supply, not help to buy” and described the scheme as “very dangerous”.
The scheme’s second part was in addition to an earlier part applying only to new-build homes which has been credited with helping 20,000 people buy a home.