In our bloodPosted: May 29, 2014
On a first glance at today’s new figures, the Help to Buy mortgage guarantee scheme is failing to live up to the fears of its critics or the hopes of ministers.
The figures released by the Treasury show 7,313 sales in the first six months of the scheme. Of these, 72 per cent were for homes valued below £250,000 and 80 per cent were to first-time buyers.
Those completions account for around 1.3 per cent of mortgages over the six months so it’s hard to see how the Help to Buy 2 mortgage guarantee (HTB2) on its own can have contributed much to rising property prices.
And the regional breakdown shows that HTB2 guarantees account for the lowest proportion of mortgage lending in the regions where prices have risen most – London and the South East.
Scotland accounts for six of the top 10 local authority areas seeing the most HTB2 completions: Glasgow, Edinburgh, Fife, South Lanarkshire, North Lanarkshire and Aberdeen. Leeds, Birmingham and Wigan also make the list, with Bristol the only entry from the south of England.
In contrast, most of the north London boroughs at the epicentre of the house price boom in the capital saw fewer than 10 HTB2 completions each. Brent and Camden saw one each and the tri-boroughs of Hammersmith & Fulham, Kensington & Chelsea and Westminster two apiece.
Worries that the cap of £600,000 would lead to a rash of high-value completions with high-value liabilities for the government do not seem to have been borne out either. There were just 31 completions worth over £500,000 and another 491 between £250,000 and £500,000.
The mean income of households with a guarantee was £49,056, and 60 per cent of households had an income of between £20,000 and £60,000. Judged against the mean property value of £151,597, that means house price: income multiples for HTB2 borrowers are actually lower than in the rest of the market.
So much for the fears – at least so far. In statistical terms, the impact of Help to Buy has been miniscule compared to low interest rates, Funding for Lending, buy to let and all the other factors underpinning and inflating prices. However, as I’ve blogged before, the deeper impact may have been psychological: the prospect of a state guarantee for the market has inflated the expectations of sellers. While HTB2 has helped 5,843 first-time buyers, Priced Out estimates that rising prices have excluded 250,000 would-be buyers from the market over the last year.
Take-up of HTB2 is accelerating – the 2,657 completions in March represents 36 per cent of the total so far – but it is still nowhere near the initial forecasts of 190,000 completions a year. The scheme was meant to guarantee £12.5 billion of mortgages but completions so far total just £153 million.
That may reflect the fact that help to buy mortgages are relatively expensive compared to the rest of the lending market and that prices in much of the South East are already too far out of reach for many first-time buyers.
It may also explain the curiously muted government spin this morning. The last time HTB2 statistics were released they came complete with case studies and personal appearances by David Cameron. The flipside of fears not being realised so far is that HTB2 has not actually helped many people to buy so far either.
Little wonder that Cameron’s press release this morning concentrates on the aggregate figure for both versions of Help to Buy. So far at least, the supposedly smaller HTB equity loan scheme (HTB1) has seen more sales per month than HTB2.
As he brought forward the launch of HTB2 in October 2013 George Osborne supposedly told the Cabinet: ‘Hopefully we will get a little housing boom and everyone will be happy as property values go up.’ So far his plans for May 2015 seem on course without much obvious help from Help to Buy.
David Cameron said this morning that: ‘As Britons, home ownership is in our blood – it’s about aspiration, planning for the future and laying down roots.’
The bigger picture is that home ownership is shrinking faster than he is helping people on to the ladder (see David Boyle’s apocalyptic warning at Hay yesterday). High and rising house prices mean that the patient expecting a blood transfusion is actually being bled dry.
Originally published on my blog for Inside Housing