Communities Secretary Eric Pickles has moved to quash speculation that Government efforts to stimulate the housing market risk inflating another housing bubble.
The first part of the Government’s Help to Buy scheme offers buyers a 20 per cent equity loan, interest-free for five years, on new homes worth up to £600,000, with buyers putting down a deposit of just 5 per cent.
Help to Buy is set to be extended to include existing properties in January and will run for three years. This second element of the Government support is a £130bn mortgage indemnity scheme for new and existing homes where the Government guarantees up to 15 per cent of the purchase price, with the borrower putting down a deposit of between 5-15 per cent.
Yesterday, data from the Office of National Statistics said house prices had risen 3.1 per cent in the year to July, up from a 2.9 per cent increase in the year to May.
The Financial Times reports Pickles saying the Government’s housing stimulus is working, with “house building and housing supply on the up”.
He said: “The tough decisions we have taken on the deficit are now delivering a sustainable increase in housing and providing real help to hard working people.”
Yesterday on the BBC’s World at One programme, Conservative MP and Treasury select committee member Mark Garnier said any risk the stimulus could create a bubble is negated by the Bank of England’s new Financial Policy Committee.
He said: “They have the power to turn the scheme off if they are concerned about it.”
Barratt, the UK’s largest house builder said it had spent £1.05bn on new land in the past year, almost double what it spend in the previous year.
A spokesman added: “If you look at what people are saying externally, there is a worry about a bubble being created by Help to Buy. But the reality is that it is not going to have a big enough impact to cause that.”