Help to Buy’s impact on the UK’s property market appears “muted”

29th May 2014

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The combined impact of the Government’s controversial Help to Buy equity loan and mortgage guarantee schemes do not appear to be creating an amplifying effect on the more active parts of the UK housing market, says trade body the Council of Mortgage Lenders.

New government figures show that, to date, only 4% of all mortgages for house purchase have involved either of the Help to Buy products (mortgage guarantee or equity loan) over the period April 2013 to March 2014.

The Help-to-Buy initiative, which has been accused of helping to inflate property prices across the UK, is aimed at would be home-buyers who can afford mortgage repayments but are struggling to raise a large deposit.  Under the scheme aspiring buyers can purchase a new-build or existing home priced up to the value of £600,000, with as little as a 5% deposit.

The table below shows a cumulative summary of Help to Buy transactions to date, compared with the wider mortgage market across all loans for house purchase over the same period. It is worth noting that the overall average property value for first-time buyers over this period was £188,600 – very similar to the overall Help to Buy property value of £190,200.

Help to Buy and wider mortgage market summary, April 2013 – March 2014

Help to Buy and wider mortgage market summary, April 2013 – March 2014

Scheme HTBMG HTBEL All HTB All house purchase
Number of completions 7,313 19,401 26,714 636,100
Average (mean) value of property £151,597 £204,805 £190,200  £243,600
Percentage of FTBs 79% 88% 85% 45%
Percentage outside London and SE 80% 76% 77% 70%

Source: HM Treasury and CML Research

However, the impact of Help to Buy varies considerably on a regional basis. For example, the active London market accounted for 13% of all loans for house purchase between April 2013 and March 2014. However, London accounted for only 6% of all Help to Buy (equity loan and mortgage guarantee) transactions.

By value, 45% of properties bought involving a Help to Buy mortgage guarantee were for properties costing up to £125,000. Only 7% of Help to Buy transactions were for properties costing over £250,000.

Commenting on the new data, CML director general Paul Smee says: “Broadly, we should be reassured by the latest data on Help to Buy. The policy appears to be reaching the geographical parts of the market where recovery has been weakest, while accounting for only a small proportion of business in those areas where the market is more active. On the basis of these figures, the scheme appears to be successfully reaching its target group of creditworthy borrowers who would otherwise be unable to buy until they had accumulated a more significant deposit. Lenders are always mindful of what their customers can afford.

“Throughout the UK, the proportion of business accounted for by Help to Buy has to date been modest overall. Any worry that the scheme risks stoking a housing boom fortunately does not seem to be playing out in practice so far.”

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