Help to Buy ‘propping up housing market’

• 9 December 2015
• From the section Business

The government’s Help to Buy scheme for new homes has become a critical factor underpinning the market, according to housing experts.

In September, 2,252 purchasers – mostly first-time buyers – used the scheme, giving it a record third quarter.

Buyers are given an interest-free loan to top up their deposits, financed by the taxpayer.

But there is concern that the popularity of Help to Buy could fuel further increases in house prices.

“Overall the proportion of sales accounted for by Help to Buy is 40% and on some building sites it is reaching 70%,” said Ray Boulger of John Charcol mortgages.

“That makes it massively important.”

Since the scheme was launched in early 2013, more than 62,500 properties worth £13.6bn have been bought with the help of taxpayer-funded loans worth £2.7bn, according to official figures.

Ministers have been keen to point out that first-time buyers made four out of five Help to Buy purchases, many of them at the lower-priced end of the housing market.

But LSL, the estate agency group that includes Reeds Rains and Your Move, is warning that Help to Buy and other support for first-time buyers could contribute to a spike in house prices.

The rise could appear as buy-to-let investors scramble to avoid the extra 3% stamp duty charge imposed by George Osborne on their purchases that comes into effect in April.

LSL’s Adrian Gill said: “There will be a growth in demand from both first-time buyers with extra financial support and buy-to-let landlords hoping to invest before the tax changes come into force.”

Help to Buy Equity Loan, for new builds, will carry on until 2020, while its sister scheme Help to Buy Mortgage Guarantee – assisting buyers of both new and existing homes – ends in a year’s time.