There is “no evidence” the Government is creating a bubble in house prices by underwriting mortgages for first-time buyers, David Cameron claimed on Thursday.
The Prime Minister was answering critics of the Coalition’s Help to Buy scheme, including the Business Secretary Vince Cable, who argue Britain’s housing problems mainly lie in there being too few homes on the market, rather than an unwillingness of banks to lend to buyers.
During a visit to Southampton to promote the scheme, Mr Cameron said anyone who thought this way was being “London-centric”. He claimed that outside the capital, where house prices rose by 12 per cent in 10 months during 2013, prices had risen by just 3 per cent in the year.
“Where we are today, house prices are still way below the peak they reached in 2007,” he said. “Forecasters do not think that 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.” When Help to Buy was announced in July, the chief economist of the Institute of Directors, Graham Leach, warned that it was “mad” to be thinking of “endless taxpayer guarantees for mortgages” and suggested that what was needed was “help to supply, not help to buy”.
Mr Cable has also suggested that the Government should consider abandoning the scheme outright, because “we don’t want another housing bubble”.
On Thursday, Labour’s 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. You can’t deal with the cost of living crisis without building more homes.”
But Mr Cameron said: “There are many parts of the country where house prices are barely moving at all. Nationally, excluding London and the South East, prices are up just 3 per cent 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 figure has risen to 6,000. If all the offers came to fruition, they would amount to nearly £1 billion of new lending.