Date Published 10 June 2013
Around 4,000 people have reserved a new home using the Help to Buy scheme in the two months since it was launched.
Help to Buy currently offers purchasers of new-build homes access to 95% mortgages, with taxpayers funding a 20% share.
According to the Home Builders Federation, demand for the shared equity loan scheme has been such that developers will now be able to increase their output significantly.
The HBF said: `Interest has been huge and there are now on average around 500 people a week taking advantage of the scheme. And because buyers only require a 75% first-charge mortgage under the equity loan scheme, homes are very affordable.`
Stewart Baseley, executive chairman at the HBF, said: `The equity loan part of Help to Buy has got off to a flying start. It has been an unqualified success so far and 4,000 reservations in just two months shows both the consumer demand for the scheme and developers’ commitment to it.
`The large deposits required in recent years to secure a mortgage have prevented many from buying – and as a result, builders from building.
`The equity loan scheme helps consumers overcome that deposit barrier and as a result the scheme will undoubtedly lead to an increase in house building. Already we are seeing companies revise their projected build levels as a direct result of the scheme. This in turn will create jobs and deliver an economic boost.`
Mark Clare, chief executive of Barratt, said: `Our production will rise to meet higher levels of demand and it is likely that our completions this year will be up 20% on two years ago.`
The second part of Help to Buy is due to kick in next January, and will offer mortgage guarantees to those with only a 5% deposit. The Government expects this part of Help to Buy, which will apply to both new and secondhand homes, to generate 190,000 sales a year.
However, Rightmove said that clarity was `desperately` needed on this element of Help to Buy.
Rightmove also said that Help to Buy has already been a hit with the public, with 72% of all prospective purchasers aware of the scheme.
In May, there were over 330,000 visits to the Help to Buy section of Rightmove’s site.
Rightmove director Miles Shipside did, however, criticise the Government for lack of information about next January’s launch of the second part of Help to Buy.
He said: `Three months on from the Budget announcement, there is no more detail. Both home-movers and the industry need more clarification as a matter of urgency, to enable them to plan and prepare.
`Indeed, the uncertainty and delay has led some to doubt whether it will actually happen.`
Meanwhile, the latest attack has labelled the scheme as `moronic`.
City analyst Albert Edwards, of Societe Generale, said it would artificially inflate prices and drive young people into `indentured servitude`.
Edwards said first-time buyers need cheaper homes, not greater availability of debt which would drive up house prices. He said: `This is madness.`
He added that house prices were still overvalued and went on: `Young people today haven’t got a chance of buying a house at a reasonable price, even with rock-bottom interest rates. The Nationwide Building Society data shows that the average first-time buyer in London is paying over 50% of their take-home pay in mortgage repayments – and that is when interest rates are close to zero.`
Edwards said it made him `genuinely really angry` that burdening young people struggling to pay off student loans with more debt was seen as the solution to the problem of excessively expensive housing.
He said: `I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business.`
Edwards has added his voice to the clamour of warnings about Help to Buy. The RICS has warned of a potential housing bubble, while the Treasury Select Committee and International Monetary Fund have also both sounded warnings. The outgoing governor of the Bank of England, Sir Mervyn King, has also expressed his unease.
The National Association of Estate Agents has yet to express its views, although its members will be at the coal-face of events when it launches in just over six months’ time.