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Help to Buy: a cure and a curse for first-time buyers

Help to Buy is pushing up property prices, hindering rather than helping first-time buyers.


by Michelle McGagh on Nov 18, 2013 at 15:17

Help to Buy: a cure and a curse for first-time buyers

First-time buyers are still struggling to get onto the property ladder despite the Help to Buy scheme, as a lack of supply drives up prices, constantly pushing the dream of owning a home out of reach.

Nationwide, which has not signed up to the Help to Buy scheme, provided mortgages to more than 30,400 first-time buyers in the six months to the end of September, a 52% increase on the same period last year. The building society now accounts for one in five first-time buyer mortgages.

Halifax, RBS and Natwest, all of which are participating in the Help to Buy scheme, have already given the green light to 2,384 applications worth up to £365 million in mortgages under the second part of the scheme, which launched at the beginning of October.

Under Help to Buy 2 the government is guaranteeing 15% of the loans provided to home-buyers with 5% deposits, meaning it is less risky for banks taking part to lend to those with small deposits.

The loans must not exceed £600,000 and it is not only first-time buyers that can benefit, but current home owners wanting to move up the property ladder. 

The first part of Help to Buy, which was launched in April and only available to first-time buyers, sees the government provide a 20% loan to those aspiring home-buyers who can raise a deposit of 5% on a new build property up to £600,000.

However, despite this positive news on first-time buyer lending from the lenders, figures released by the National Association of Estate Agents reveal a different story.

The NAEA figures, which are compiled from 13,000 estate agents, reveal a 1% drop in the number of first-time buyers completing on house purchases in October.

This is the second month in a row that the figures have dropped and 24% of buyers are now doing so for the first-time.

NAEA said this ‘could be a concern’ considering the recent introduction of Help to Buy and may indicate the government is not doing enough to help certain segments of the market.

While the NAEA said it may take longer for the impact of Help to Buy to be registered by estate agents, considering the length of time it takes for a property purchase to go through, there are concerns that a lack of demand could continue to push out first-time buyers.

Even though the government has provided a boost to potential homeowners by guaranteeing 95% mortgages, the lack of housing supply is continually pushing up prices and putting the prospect of owning a house further out of reach.

A spokesman for NAEA said while lenders are reporting an increase in applications, it was not being reflected in purchases.

‘The mortgage lending figures are applications but that does not mean they all go through. Our figures are reports on the percentage of sales to first-time buyers and over the last three months that is one in four buyers. The figure is pretty consistent but in the past month the figure has gone down 1%,’ he said.

‘Supply has dropped so there is more competition in the market and that is driving up prices to a point where first-time buyers cannot compete.’

The latest Halifax house price index showed the average house price now stands at £171,991, up 0.7% in October and 6.9% in the past year. The consistent rise in prices that have been seen over the best part of the year have been put down to a lack of properties on the market, creating fierce competition particularly in London and the South East, but is slowly working its way outside of the south of England.

3 comments so far. Why not have your say?

Dennis .

Nov 18, 2013 at 17:53

Perhaps it should be called "Help to Buy Votes"

Can't understand why people think that rising house prices are a good thing.

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Anonymous 1 needed this 'off the record'

Nov 19, 2013 at 13:43

Anyone else who disagrees with this lunacy is welcome to sign the petition:

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William Phillips

Nov 19, 2013 at 14:18

This country and the USA have a collective fetish about home 'ownership' (with crippling debt) and the 'security of bricks and mortar' as an asset superior to investment in productive enterprise. It needs a shrink or cultural historian to explain it.

Europe does not have such hang-ups. Maybe the experience of rebuilding a modern economy from the rubble of WW2 cured the Germans of worshipping at the altar of hearth and home. Mediterranean peoples do not hide away from their neighbours and shun the public square after dark the way Brits do. It must be something to do with the weather and the nights getting dark earlier: we are desperate for a retreat that nothing can touch us once inside.

Help to Buy may be one of the last spasms of this politically encouraged lunacy which began with Anthony Eden trying to purchase Tory votes by promising to foster a 'property owning democracy'. Right wing parties have always thought that homeowners can't be socialists, though credit to Mrs T for abolishing tax relief on mortgage loans, which conventional wisdom said was 'politically impossible'.

I suspect that the UK majority are by now so fed up being hag-ridden by the rigged nonsense of house prices that they would welcome this bubble being exploded. Then savers could get a decent return and borrowers cut their coats to their cloth for a change. The general level of property prices would fall for all. There would be a few incidental sufferers, but in ten years we would be wondering why we hadn't popped the bubble long ago, and why we were so sure that 'investing' in rabbit hutches was better than owning shares in great companies exporting and competing for Britain.

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