Cameron dismisses bubble fears

Hampshire Chronicle: David Cameron has dismissed fears that the Government is pumping up a housing bubble. David Cameron has dismissed fears that the Government is pumping up a housing bubble.

David Cameron has dismissed fears that the Government is pumping up a housing bubble as he hailed the success of the Help to Buy scheme.

The Prime Minister branded sceptics of the mortgage guarantees - such as Liberal Democrat business secretary Vince Cable - "London-centric".

In many parts of the country prices were "barely moving at all", he insisted.

More than 6,000 people have put offers in on homes and applied for mortgages using Help to Buy since it was launched about three months ago.

Nearly 750 homeowners have completed their purchases and hundreds were able to spend Christmas in their new homes, according to the Government.

Mr Cameron said the initiative meant people without wealthy parents and a big deposit could "realise their dream" of owning a home, a nd he rejected concerns that high demand was already overheating the market.

"Where we are today, house prices are still way below the peak they reached in 2007," he said.

"Forecasters do not think they will get back to the level before the crash even in 2019. So there is no evidence of a problem.

"This is about helping people to achieve the security and stability they want of owning a flat or a home of their own.

"We are not helping people to buy flats or homes they cannot afford.

"We are helping people who do not have wealthy parents, who cannot get a big deposit together, and helping them to realise their dreams."

He added: "I think if you look across the country, there are many parts of the country where house prices are barely moving at all.

"Nationally, excluding London and the South East, house prices are up just 3% over the last year.

"I think there are some people who are rather London-centric about this."

In November, ministers published figures showing that in the first month after being launched more than 2,000 people had put in offers on homes and applied for a Help to Buy mortgage. That number has now trebled.

The mortgages, once approved, would represent nearly £1 billion of new lending to aspiring home owners who may have previously found the property market out-of-reach because of the size of deposit required.

Barclays and Santander will introduce their own Help to Buy products on to the market this month, joining Lloyds Banking Group, RBS, HSBC, Virgin Money and Aldermore who have all launched products over the last three months.

The expansion will mean two thirds of the entire UK mortgage market will offer products under the Help to Buy scheme, bringing home ownership to a growing number of people.

New figures also show that an additional 20,000 households have also been supported by the Help to Buy Equity Loan scheme, a separate scheme where the Government provides an interest-free loan to support the purchase of the newly built home.

House building is now growing at its fastest rate since 2008, and is seen as a critical part of the country's economic recovery.

On average applicants are looking to buy homes worth £160,000, which remains below the UK average house price of £247,000.

They will face average monthly repayments of around £900 and have an annual household income of around £45,000. This means a Help to Buy mortgage represents 23% of borrowers' gross income.

Around three quarters are from outside London and the South East, while more than 80% are from first-time buyers.

Shadow housing minister Emma Reynolds said: "Any help for first-time buyers struggling to get on the property ladder is to be welcomed. But rising demand for housing must be matched with rising supply if this scheme is to bring the cost of housing within the reach of low and middle income earners.

"Instead, under this Government, house-building is at its lowest level since the 1920s.

"You can't deal with the cost-of-living crisis without building more homes. That's why Labour has committed to building 200,000 homes a year by 2020."

Mr Cameron was questioned about what would happen to homeowners under the Help to Buy scheme if interest rates rose this year.

He told ITV Meridian: "We want to keep interest rates low and that's why they are set by the Bank of England and they are independent.

"But the Government is doing its bit by getting on top of the deficit, getting that down, running the economy sensibly, making sure we are not spending more than we can afford, and that should help keep interest rates low.

"But the people who are taking on these mortgages under the Help to Buy scheme, they can afford the mortgage payments, they are earning decent wages but what they haven't been able to do is get a deposit together."

Treasury Minster Sajid Javid told Channel 4 News the scheme was "good news" to start the year.

He said: "What today's numbers show is this scheme is working and achieving its aims, which is to increase the availability of low deposit mortgages and help those people who can afford those mortgage payments, quite easily afford those mortgage payments, but they don't have large savings to meet the big deposit requirements.

"Prices today at still 13% below their peak in real terms and even the independent Office of Budget Responsibility says five years from now they will be 3-4% below their peak in real terms."

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