Thirty years ago, a young couple wanting to buy a house needed a five per cent deposit.
Today, they will often need up to 20 per cent. If they’re trying to buy a £200,000 house they will need to save £40,000.
Sums like this are putting home ownership beyond the reach of young people. Of course, the situation in the South Downs is even worse, since property in our villages is so expensive.
This, plus the impact of the downturn, has dramatically reduced the number of first-time buyers, which last year was at half the level it was in 2007.
The problem has been that the banks won’t lend the necessary sums even where buyers are creditworthy. The Home Builders Federation says that “a lack of affordable mortgage availability remains the biggest constraint on housing supply”.
It is this problem of finance that the Government’s Help to Buy scheme is designed to address. Mortgage guarantees will help those who can afford the mortgage payments but not the deposit.
The scheme is open for houses up to a price cap of £600,000. The buyer would only need a five per cent deposit. The Government then guarantees up to 15 per cent of the property’s value, in return for a fee aid by the lender.
Only repayment mortgages will be offered by the scheme, underpinned by tough checks on the buyers that they can afford the mortgage payments.
Last week the Chancellor announced that Help to Buy would begin three months early, and one by one the banks have been announcing their support.
Critics say that Help to Buy will stoke a housing bubble, but the reality is that in most of the country there’s no house price boom. The hottest spots in London are effectively excluded by the limit on roperty values, and the Bank of England is charged with keeping an eye on the scheme.
In the long term, we need to address the growing gap between incomes and property prices, and realise that house price inflation has benefited some while exacting a price on the next generation.
But in the short term, Help to Buy will help to get the housing market moving, which is why the CBI support it, and it will help hard working young people to realise the dream of ownership that others already enjoy.