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Help to Buy has helped buyers of cheap homes: First-time purchasers get 80% of loans, data reveals: Controversial scheme is not centred on London

May 30, 2014

Hilary Osborne

The second part of the government's controversial Help to Buy scheme has backed pounds 1bn of mortgages in its first six months, with 80% going to first-time buyers, according to official figures.

The scheme to make home loans more easily available to buyers with deposits as low as 5% has guaranteed 7,313 home loans, most at the lower end and outside the pressure cooker markets of the south-east, the Treasury said yesterday.

The proportion of Help to Buy mortgages granted in the north-west of England was the same as in the south-east. Leeds was the local authority with the largest number of buyers helped under the scheme, with a total of 116 over the first six months. Bristol had 70 and Glasgow and Edinburgh both more than 80.

Despite property worth up to pounds 600,000 being eligible for the scheme, the average value was pounds 151,597, well below the overall average house price of pounds 252,000 recorded by the Office for National Statistics, and nearly half of loans - 45% - were on properties costing pounds 125,000 or less.

The second part of Help to Buy, which was rushed forward to October 2013, offers lenders a taxpayer-backed guarantee on loans of up to 95% of a property's value.

It has been criticised by some experts for stoking demand for homes without addressing the chronic shortage of supply, and there have been calls for it to be withdrawn or limited, particularly in the south-east where annual price rises have been in double digits.

But Treasury figures reveal only 5% of Help to Buy mortgages were taken out in London, a total of 385 home loans. These were on an average property value of pounds 288,390 and to applicants with an average income of just over pounds 80,000. The rest of the south-east accounted for 14% of the loans, a total of 1,011, with the average property purchase coming in at pounds 206,731.

The same proportion of loans was taken out in the north-west of England, where the average purchase price was pounds 125,953.

Only 31 of the loans guaranteed in the six months were on property valued at more than pounds 500,000. There were 189 mortgages on properties worth pounds 350,000 or more.

David Cameron said the scheme had helped buyers and builders. "As Britons, home ownership is in our blood - it's about aspiration, planning for the future and laying down roots," the prime minister said.

"Help to Buy has helped thousands of hardworking people to buy a new home and crucially it is helping to increase the number of new homes being built around the country."

But Grainia Long, chief executive of the Chartered Institute of Housing, said there were still concerns about the scheme.

"The median household income for borrowers using the mortgage guarantees was pounds 42,597 - almost exactly the same as the median household income across the market for people buying a house with a mortgage (pounds 42,731)," she said.

"This suggests that it could be helping people who would most likely have been able to secure a mortgage anyway, rather than people on lower incomes."

The Council of Mortgage Lenders (CML) said Help to Buy in its entirety did "not appear to be creating an amplifying effect on the more active parts of the UK housing market". It said only 4% of mortgages since April 2013 had involved either the second part of Help to Buy or the first - which offered interest-free loans on newbuild properties only. The south-east, where the homes shortage is perhaps most acute, was the biggest user of the first part of the scheme, it said, accounting for 16% of the total. The east made up 13%.

The CML's director general, Paul Smee, said the data was "broadly" reassuring. "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," he said.

Separately, the property firm Hometrack said its monthly house price survey showed signs of a slowdown.

The research, based on information from estate agents and surveyors across England and Wales, showed the number of postcode districts reporting price rises fell to 42% in May, from 50% in April and March, while the overall increase in prices fell to 0.5% from 0.6%.

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Source: Guardian (UK)

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