CML Say Help To Buy Is Not Creating Another Property Bubble

CML Say Help To Buy Is Not Creating Another Property Bubble

Help To Buy Only Accounts For 4% Of Annual Mortgage Approvals 

New analysis of the UK residential mortgage market by the Council of Mortgage Lenders (CML) has revealed that the impact of the government’s Help To Buy scheme on the UK property market has been fairly limited.

Property pessimists have tried to claim that the Help To Buy initiative is responsible for creating another property bubble, however, official figures show that HTB has had little impact on UK property sales.

The Help To Buy scheme accounts for just 1% of all residential mortgages taken out in the six month period to March 2014.

According figures from the CML, only 4% of all UK mortgage approvals between April 2013 and March 2014 were part of the Help To Buy scheme, but 85% of those taking part in the scheme were first-time buyers.First-time buyer activity usually accounts for 45% of the general UK property market every year.

Only 7,313 residential properties have been sold with mortgage guarantee’s underwritten by the Government, and the majority of property purchases were actually outside London, contradicting the views of property pessimists who reckon that the initiative was the reason for rising property prices in the capital.

The average value of mortgage loans taken out using the Help To Buy scheme is £136,742 (GBP), equivalent to half the average price of property in England and Wales according to the Office for National Statistics (ONS).

In total, 27,861 property purchases have been completed using the Help to Buy scheme, from its inception as part of the Funding for Lending scheme, (FLS) in March 2013, through the launch of the second ‘Mortgage Guarantee’ stage in October 2013.

Under the scheme, buyers can purchase property up to the value of £600,000 (GBP) and part of their deposit or mortgage loan is underwritten by the Government.

Overall, the CML data shows that Help to Buy scheme has not had the huge negative impact on property values that pessimists first predicted, instead property values are being driven upward by returning consumer confidence and lack of available property coming to market.

Paul Smee, CML Director General said: “The Government’s Help To Buy 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. Far from being a condemnation of the scheme, the results prove it is working well.”

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