‘Help to Buy’ bubble threat overblown

When the Government announced its intention to step in and underwrite a staggering £130bn in mortgage loans as part of its Help to Buy scheme last year, fears abounded.

Unlike the first phase of Help to Buy, which was targeted solely at new build homes, taxpayer mortgage guarantees for any home at all worth up to £600,000 were described by some economists as “madness”.

Critics said they threatened simply to pump up prices without any encouragement to increase supply.

The Bank of England meanwhile sees housing as the “blinking warning light” on the dashboard.

Six months on from the launch of Help to Buy 2, however, Armageddon has so far failed to arrive. Philip Shaw, the chief economist at Investec, says there has been “not much usage nor abusage” of the scheme.

The total value of mortgages supported by HTB2 is a modest £1bn – in fact 7,313 transactions in total – accounting for just 1.3 per cent of all mortgage loans over the period. Moreover, it seems to be doing what it was supposed to: helping a far greater proportion of first-time buyers in areas like the North-west, while London accounts for just 5 per cent of mortgage completions so far.

Taking the temperature with local estates agents, the regional picture (where prices are up less than 5 per cent year-on-year according to official figures) offers little support to bubble theorists.

Key: % of total Help to Buy 2 (% annual price rises according to ONS, March)

North-east 4% (4.1%)

Paul McSkimmings at Edward Watson in Newcastle

“I have noticed it has helped to kick-start the housing market in the area. In the North-east there has not been a big price increase, but it has raised the property demand. In the short term, it has had a positive effect and should be continued.”

Yorkshire & Humber 9% (5.3%)

Kenneth Bird at Renton & Parr, Wetherby

“The three deals we’ve done went well. While it hasn’t made a big impact, it has been a confidence boost to buyers wanting to break into the property market.”

West Midlands 8% (4.4%)

Damien Bourne at Robert Oulsnam, Barnt Green

“It has certainly increased inquires, but has not been a great influence in the increase of housing prices. Personally, I would rather see them save the money, and build more houses with it.”

East Midlands 9% (5%)

Martin Pendered at Martin Pendered, Wellingborough

“We have noticed a significant improvement in the market, but this has been unrelated to the scheme.”

East 9% (6.6%)

Jeffrey Hazel at Geoffrey Collins, King’s Lynn

“We’ve had two HTB deals – both were first-time buyers that would not have been able to step into the scene otherwise. There has been an increase in the volume of transactions, but it’s not as big as everyone had hoped.”

Northern Ireland 1% (0.3%)

Julie Gibson at McClelland Salter, Lisburn

“Prices and interest have not been changed at all by the scheme.”

London 5% (17%)

Markus Brilliant at Jeremy Leaf, Finchley

“Typically, people are interested in the scheme for properties of lower value – most properties in London fall in a higher price range.”

South-west: 8% (5.8%)

Edward Page at McCartneys, Hay-on-Wye

“The presence of the scheme has been absolutely minimal: we’ve only done a couple – the interest rate wasn’t quite as competitive as they had hoped while the banks still see it as a big risk.”

Scotland 13% (0.8%)

Graeme J Lusk at Graham + Sibbald, Ayrshire

“HTB1 [is] making it more attractive to buy a brand new property instead of an already built property. So it’s definitely helped the new build market… house prices have stabilised as result of the scheme.”