The government’s flagship Help to Buy schemes are playing a supporting rather than a starring role, said chief economist Robert Gardner, rather than fuelling house price growth.
The data means that house prices recorded their thirteenth successive monthly increase taking the average price of a typical home to £185,512.
‘There have been tentative signs that activity in the housing market may be starting to moderate, with mortgage approvals in April around 17% below January’s high. It is too early to say whether nationally this is indicative of a cooling trend in the wider market. The slowdown may partly be the result of the introduction of Mortgage Market Review (MMR) measures, which may take a few months to bed down,’ explained Gardner.
‘The underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer. However, with mortgage rates close to all-time lows and labour market conditions continuing to improve, underlying demand for homes is likely to remain strong,’ he added.
He also explained that while first time buyers are driving the recovery, Help to Buy is unlikely to be the main factor. First time buyers accounted for 48% of house purchase activity in March, a record high well above the long run average of 38%. Data from the Department of Communities and Local Government suggests that the Help to Buy scheme is providing support to first time buyers, who accounted for over 80% of Help to Buy loans to date.
‘However, the modest numbers involved so far suggest that Help to Buy is unlikely to be the main factor behind the recent pickup in the wider housing market. For example, 12,853 Help to Buy mortgages were completed in the first quarter, some 6,327 under the mortgage guarantee scheme and 6,526 under the shared equity scheme, equivalent to around 9% of total mortgage completions over the period,’ Gardner pointed out.
‘Low mortgage rates and growing buyer confidence on the back of improving labour market conditions and the brighter economic outlook are probably playing a much greater role in stimulating buyer demand,’ he added.
Gardner also said that Help to Buy appears to be playing less of a role in areas which have seen the strongest recovery in house prices. For example, London has recorded the fastest pace of house growth in recent quarters, with prices rising at an annual pace of 18% in the first quarter of the year, almost twice the pace recorded in the UK as a whole. But the building society estimates that Help to Buy accounted for around 4% of mortgage completions in London, the lowest proportion amongst the UK regions.
‘Help to Buy has accounted for a larger share of transactions in regions such as the North of England where house price growth has been less marked. Moreover, the evidence suggests that higher priced areas have been seeing the largest percentage increases in house prices, especially in London and the South East, but the majority of Help to Buy loans have been on transactions where the property values are below the national average,’ said Gardner.
‘For example, 45% of Help to Buy mortgage guarantee loans were for property costing £125,000 or less, while only 22% of all mortgage house purchase transactions were on property values below this threshold,’ he added.
