The government’s Help to Buy scheme will only be successful if more new houses are built across the UK to match increased demand, according to Lloyds chief executive Antonio Horta-Osorio. The boss of the taxpayer-backed lender has said that the scheme – which allows buyers to get on the property ladder with just a 5% deposit rather than the usual 20%, thanks to a government guarantee – will need to be assisted by the development of new private and social housing, or else rising mortgage approvals would drive up house prices.
Interviewed by the Financial Times, Horta-Osorio said: “It is important that planning permits, building authorisations and social housing projects are [liberalised] so that the increase in transactions does not lead to a substantial increase in house prices.”
The scheme is entering its second stage, after the pilot round of Help to Buy assisted families with buying newly built homes. Now, all homes will be available to prospective buyers. The Lloyds group, which includes Halifax, will be providing mortgages under the Help to Buy banner – but Horta-Osorio added that the £12bn programme should be focused outside London and the South East, where house prices are rising quickly.
UK monetary forecasting body the Independent Treasury Economic Model (ITEM) has responded to fears of a housing bubble as pure “hysteria”, adding that the initiative aimed at getting more people on the housing ladder will see house prices grow by 3.5% this year and by 6.6% in 2014. Considering that the government’s timing for the latest phase of Help to Buy is ideal, ITEM chief Peter Spencer said: “Despite the recent criticism of these initiatives, the chances of seeing another housing market bubble are extremely slim.”
All of the major high-street banks, including Royal Bank of Scotland and Natwest, are set to be involved with Help to Buy, and it is estimated that the scheme will deliver up to 180,000 housing loans. David Cameron has continued to state that the scheme is “the right thing to do”, adding: “I don’t want to be the Prime Minister who stands aside, who says you can only buy a flat or a home in our country if you’ve got rich parents. That’s not fair.”
The Treasury argues that Help to Buy is fair as it will make mortgages more readily available to a greater number of people for houses worth up to £600,000.
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