House Prices Up As PM Mulls Help To Buy Future

Written By Unknown on Rabu, 21 Mei 2014 | 11.46

House prices have risen 8% in the year to March, figures have shown, as David Cameron said he would "consider" changes to the Help To Buy scheme if advised to do so by the Bank of England.

While the increase is down on the 9.2% rise announced in February, according to the Office for National Statistics, the continued strong price growth, particularly in London and the South East, is set to fuel criticism of the government scheme which underwrites home loans for people without large deposits.

Bank of England governor Mark Carney told Sky News at the weekend that the housing market had "deep, deep" problems.

In an interview with Sky's Murnaghan show, Mr Carney warned rising house prices represented the biggest current risk to the economy.

In response, the Prime Minister indicated he was open to rethinking Help To Buy, which critics argue contributes to forcing up house prices by fuelling demand, which far outstrips the supply of available homes.

Asked if he would look at reducing the programme's £600,000 threshold, Mr Cameron said: "Of course, we will consider any changes that are proposed by Mark Carney.

"But, as he said, this is a well-targeted scheme and it's helped tens of thousands of people get on the housing ladder and to have mortgages."

David Cameron visits Jaguar Land Rover Mr Cameron says Help To Buy has helped tens of thousands of people

In a bid to tackle housing inflation in London, Britain's biggest mortgage lender is imposing a new loan-to-income cap on people looking to borrow more than £500,000.

Lloyds Banking Group said people applying for a mortgage in excess of that figure will only be able to get up to four times their income.

The new policy will apply across the UK but Lloyds said it is primarily aimed at the soaring London market. It expects the change to affect around 8% of its lending in the capital and around 2.5% elsewhere.

The ONS report said annual house price rises in England were being driven by a 17% year-on-year increase in London, a 6.6% hike in the East and a 6.1% rise in the South East.

The average house price in London has reached £459,000, while the average price in the UK as a whole now stands at £252,000, slightly down on the £253,000 peak in February.

The 0.5% drop marks the first time property values have fallen month-on-month in just over a year.

Housing market Shelter says the housing market has reached "boiling point"

However, first-time buyers now face having to pay 10% more than they did a year ago, with the average price of a starter home standing at £193,000 in March, according to the ONS.

Campbell Robb, chief executive of housing charity Shelter, said: "These figures are yet more proof that our housing market is reaching boiling point.

"With every rise in house prices leaving more people priced out or stuck in cramped homes, rollercoaster house prices are rapidly losing their feel-good factor."

In his Sky News interview, Mr Carney signalled he is ready to take action to cool the housing market.

He said the Bank could adopt a range of measures, including a new "affordability test" for borrowers and advising the Government to curb the Help to Buy scheme.

Lib Dem Chief Secretary to the Treasury Danny Alexander said: "Help to Buy doesn't change any of those, the qualifying criteria that people need to follow in order to get a mortgage, but what it does do is help to open up the housing market to people who otherwise would be excluded from it."


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