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AUDIO: Has Help to Buy caused inflation?

AUDIO: Has Help to Buy caused inflation?

Category: Mortgages

Updated: 03/06/2014
First Published: 03/06/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Sylvia Waycot, editor of, speaks to BBC Radio Coventry and Warwickshire's Phil Upton's regarding Help to Buy, after latest figures revealed that the second phase largely supported homebuyers outside London – perhaps suggesting that the scheme hasn't had the inflationary effect on house prices that was initially thought.


Phil Upton: More to come, but it's six minutes past six. 27,000 people, that is the statistic of the number of people who bought a new home through the government's Help to Buy scheme. The scheme, which aimed to make property ownership more accessible to first-time buyers, is largely being seen as a huge success. Launched last October, part of a long-term plan to help people secure a better future for their families. But are these figures out today really proving it to be as successful as these new figures suggest? Sylvia Waycot is editor of the website Sylvia, good evening to you.

Sylvia Waycot: Good evening.

PU: And for people who aren't familiar with Help to Buy, it might be just worth a quick explaining, if you like, of why the Help to Buy scheme works.

SW: Okay. It came in two phases. Phase one was where they were just trying to get new properties built, so that there were more houses to actually move into. But it was quite complicated and so six months later, they brought out phase two, which basically means that you could have a 95% mortgage on any property, an old property or a new one, and it's much less complicated. But there's been a lot of people worrying that it was going to create a housing bubble, that it was going to be even worse in London and that lenders would only lend in London and consumers wouldn't actually get the benefit of cheap rates. And what this report has done today, is it's laid those fears to one side, because it's shown that in actual fact, most of the lending hasn't been done in London on these particular schemes. Most of the lending has been done in the north.

PU: 94% of it, outside London.

SW: Yeah, yeah.

PU: A quite staggering amount actually.

SW: I think a lot of people would be very shocked at that, but that's what the stats are showing, although it is still really early days.

PU: I'm just thinking, in terms of the type of houses that are being bought by people using Help to Buy, what sort of price range are we talking about and do we know?

SW: It's the first-time buyer market that they're interested in kick-starting, because that's what really moves the market along. And so it's aimed at people that can actually find a five percent deposit. They've looked at the average spends and the norm seems to be about £125,000 that people are taking on.

PU: Oh, right. So that's actually quite small, isn't it?

SW: Again, yes, but that is because it is not in the London area and a lot of the focus is on London prices. But first-time buyer properties up north are not necessarily going to... Well, they're not going to match the London or the south.

PU: And Sylvia just give me some idea of your view of the figure then: 27,861 households, the exact number that have taken advantage of this scheme, that number itself, is that about what you'd have expected or do you think it's lower or higher than you thought it might have been?

SW: I think it's small when you compare it to the total number of mortgages that were approved over the same period, which was more like half a million. So in actual fact, it is a small number but that might be because we all have been...

PU: I'm sorry, forgive me. Half a million mortgages have been approved in the same period the Help to Buy has been available and in all those half a million, only 27,000...

SW: Are part of this scheme.

PU: Are Help to Buy.

SW: But then not all of the lenders joined the scheme, it's been quite interesting. What's happened is that the majority of banks have joined it and some of the bigger building societies, but some of the smaller building societies, they... One of the things that they like to do is, they like to know their customer, they like to stay in the area that they are known in and they know the houses in that area, they know the people, they know the work. And so they're able to actually make more of a decision on the lending based on the area that they understand. So what's happening is there's a lot of building societies that are offering really good first-time buyer mortgages that match this scheme, but aren't actually part of the scheme.

PU: In terms of the scheme itself, well, what will we take, can you think, from these figures today by the housing market? Will this sort of push more people to go "Well, Help to Buy has obviously worked, we need to expand it or make it better" or do you think this will cause another... A rush in the housing market? There's lots of talk, isn't it about interest rates? "Maybe I'm gonna go up before the general election." What do you think the market as a whole will make of what's come out today?

SW: Well, recently, there has been cause for the whole Help to Buy to be slowed down to make it maybe not available to such high sums for the London areas and things like that. And I think what this will do is it will probably make them not be so quick to jump to those conclusions, because now they can actually say "Well, evidence suggests that it's not doing all these bad things to the economy that you thought it would do or to the housing market that you thought it would do." So it might actually keep it going for a little bit longer. Anything in the news about the availability of mortgages is always going to be good for first-time buyers, because it gives them the confidence that "Yes, I too can get on that market."

But what they need to know is that they still need to have a good credit history, and they now have to jump this new hurdle of having the mortgage providers want to know exactly what they're spending their money on all the time, so that they can see whether or not they can afford the mortgage if the rates increase, which everybody knows they're going to eventually.

PU: Sylvia Waycot, I appreciate your time tonight. Thanks, so much indeed.

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