Help to Buy has boosted housing market, says Pickles

13 Aug 13
The government’s Help to Buy scheme has kick-started the private housing market, Communities and Local Government Secretary Eric Pickles said today.

By Mark Smulian | 13 August 2013

The government’s Help to Buy scheme has kick-started the private housing market, Communities and Local Government Secretary Eric Pickles said today.

Some 10,000 reservations for new homes have been made in the past four months, and major housebuilders have said they are increasing their building rates after the past five years’ slump, according to Pickles.

Help to Buy covers two schemes. There is an equity loan equivalent to 20% of a property’s value, interest free for five years, and a mortgage guarantee scheme, due to start in January. Under this guarantee, lenders can use government-backed guarantees to offer around £130bn worth of mortgages with smaller deposits than normal.

Both schemes have faced criticism that they will fuel another house price bubble of the kind that burst in 2008.

However, Pickles said: ‘The government’s package of measures to boost the housing market is working, with housebuilding and housing supply on the up’.

He added: ‘We are helping thousands of young people and families get on and move up the housing ladder, and Britain is building again.’

According to the Department for Communities and Local Government, some 67,422 new homes were registered in the UK between January 2013 and the end of June.

Both repossessions and mortgage arrears were at their lowest levels since before the crash.

Mark Clare, chief executive of housebuilder Barratt said: ‘Customer interest in the Help to Buy scheme has been very strong as it addresses the issue of lack of mortgage finance at higher loan to values.

‘Interest has been particularly encouraging from customers previously locked out of the market by high deposit requirements. Our production will rise to meet higher levels of demand and it’s likely that our completions his year will be up 20% on two years ago.’

The Council of Mortgage Lenders has also said that lending to first-time buyers has hit its highest quarterly total since 2007 with 68,200 people buying their first home in the second quarter of 2013.

It said 25,300 loans were advanced to first-time buyers in June, a 30% increase on the position a year earlier.

Responding to the figures, the Centre for Economics and Business Research said there are now ‘clear signs’ that the housing market was recovering.

Senior economist Scott Corfe said that government policy measures such as Help to Buy, as well as Funding for Lending, were ‘strong drivers’ of the rebound.

‘The recovery in the housing market is, we think, a significant factor explaining the pick-up in economic growth and consumer confidence seen since the start of 2013,’ Corfe said. ‘Although earnings are trailing behind inflation at present, squeezing household incomes, this housing market feel-good factor should support consumer spending in the short-term.'

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