Are you one of the many people who believe that a “housing bubble” is upon us? If so, you need to “get out more”, according to a treasury minister. The treasury minister said this in response to claims by the public that house prices would rise due to the government’s help to buy scheme.
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The chief secretary of the treasury, Danny Alexander, dismissed concerns that the 95% mortgages backed by the government will push up house prices. The comments he made when he insisted people “get out more” to Sky News, were a direct challenge to the Commons Treasury, who were the people that warned of house prices possibly rising.
On the scheme’s launch, when RBS and Natwest opened their doors to the first Help To Buy customers, Alexander said the scheme was desperately needed to help people with a smaller budget and less savings to own their own homes. During some broadcast interviews, he said he didn’t see this housing boom that commentators continued to talk about. He was quoted, “The average house price increase over the last year is 0.8%, and only rises to 3.3% when you include London and the South East. In more expensive areas like Kensington and Chelsea, you’ll see a much more active market. However, 70% of the transactions are above the £600,000 cut off level that the scheme is set at.”
This could mean that people have been too quick to tar the rest of the UK with the same brush as London and the surrounding areas. Prime Minister David Cameron made big promises when announcing the Help To Buy Scheme, saying that it would help many people begin a family. People who use the Help To Buy Scheme will be able to get a house of up to £600,000 with a deposit of only 5%. The government can guarantee 15% of the loan, in return for a fee from the lender. This would lower the average deposit needed from around £40,000 to only £10,000.
While this all sounds well and good, it wasn’t without the warning from the Commons Treasury committee, who said the scheme could carry threats to financial stability. Andrew Tyrie is just one of the many politicians who believe this scheme could create a housing bubble. The Prime Minister wholeheartedly defended the scheme, and said, “people who can afford the monthly payments but haven’t got rich parents can’t pay the deposit up front.” Cameron went on to say that it was essential for the government to act, as buying your first home is much more than somewhere to sleep at night. He described it as an investment for the future, and somewhere you could put down your roots and raise a family.
This scheme is only set to run for 3 years, and the treasury committee think that the government will come under extreme pressure to extend the scheme if it proves to be popular. The scheme has already attracted much interest from home buyers, which has pushed up prices across the country according to a wave of estate agents. So, while people are struggling to sell their homes, house prices are soaring. If you’re looking to sell your home, you could always look at a “we buy any house” company for a quick sale, although it could be better to hold off and see if you can get a better deal.
What do you think; are house prices rising, or do we all need to get out more?