Help to buy causing house bubble

Has Help to Buy Caused Housing Bubble?

House prices have reached £250,000 for the first time ever, leading many financial experts to ask whether the government Help to Buy scheme is creating a housing bubble.

The figures from a Office of National Statistics report shows by the end of 2013 thousands more home owners became obligated to pay the 3% stamp duty.

The speed of increase in house prices has surprised many experts, with the ONS reporting a 5.5% rise in December from the same month a year previous. Prices rose 0.1% in December from November.

Regional House Price Rise

Even excluding London house prices, which are usually higher than the UK average, prices across the UK rose by 3.1% in the year to December.

House prices in London alone rose 12.3% in the year, while the lowest regional increase was in Scotland rising only 0.5% during the same period.

Region
House Price Rise
UK5.5%
England5.7%
Wales4.8%
Scotland0.5%
Northern Ireland4.8%
North East3.0%
North West3.5%
Yorks & The Humber1.8%
East Midlands1.9%
West Midlands4.3%
East4.6%
London12.3%
South East3.8%
South West2.5%

House Prices: First Time Buyers

A gap has grown between the house prices paid by first time buyers and existing home-owners, another sign Help to Buy is responsible.

On average first time buyers paid 7.4% for a property than a year previous, while current owners paid only 4.7% more than 12 months previously.

Although the government back Help to Buy scheme is suitable at both first time buyers and current home owners, the greatest benefit is to new buyers.

Help To Buy Warning

Help to buy causing house bubble

The Help to Buy scheme has managed to get the housing market moving, as evidenced by the new report showing new homes being built has increased.

The problem could be people are more willing to pay extra money if they for a property when they are able to get it from the government equity loan scheme.

Now it’s first time buyers who could find themselves at the greatest risk of being able to afford a mortgage because prices have risen even higher.

First time buyer pressure group, PriceOut have been extremely critical of the Help to Buy scheme and accused it of harming the housing market.

PricedOut spokesman Dan Wilson Craw said,

“The Help to Buy scheme is an utter travesty. The government reckon they have a policy that will help me and other young adults, but it is managing to achieve the exact opposite, condemning thousands of us every month to a lifetime at the mercy of landlords.”

Help to Buy: Mortgage Guarantee

The mortgage guarantee scheme allows lenders to have the loan protected by the government if the borrower fails to repay and the property is repossessed.

This part of the Help to Buy scheme is possibly not as guilty for the rising house prices because it doesn’t directly affect the price offered for a property.

Check some of the mortgage guarantee products from participating lenders.

Has Help to Buy Caused Housing Bubble? 4.43/5 (88.57%) 7 votes

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About 

Kim has over 20 years experience writing for personal finance blogs under an array of different names. Her experience and knowledge of daily news helps guide the website and the content we release.

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