London and the south-east grabbed the largest share of Help to Buy loans, according to the latest figures showing more than 48,000 homebuyers have used the government scheme aimed at homebuyers with small deposits.
Adding to concerns that subsidies have triggered a surge in house prices, 7,501 buyers in the south-east and 2,837 in London have taken out either an interest-free loan on a new build home or used the mortgage guarantee that allows them to buy a home with only a 5% deposit. The popularity of the scheme in the south-east pushed the north-west into second place, where 6,180 buyers have completed a purchase.
Critics of the mortgage guarantee element of Help to Buy warned when it was launched almost year ago that it would push prices in London and the south-east higher unless the government found a way to increase the supply of homes coming up for sale.
But they are likely to draw some comfort from data showing the number of people using the mortgage guarantee part of Help to Buy fell in June, compared with May. They may also find cheer in figures showing the average size of a Help to Buy mortgage fell last in June, with the typical loan now nearly £10,000 lower than the £150,000 limit imposed by Lloyds bank.
According to Mortgage Advice Bureau, the average Help to Buy loan is £6,000 lower than the average in May.
The mortgage guarantee has proved the most controversial element of the scheme because it allows buyers to effectively increase the level of deposit used to buy a home and overcome mortgage restrictions imposed by lenders. As with the other part of the scheme, it is open to all homebuyers regardless of their income, and can be used on properties costing up to £600,000.
The government’s guarantee can be called on by lenders if the borrower defaults on the loan and the property has to be sold at a loss.
In the first nine months after its launch the Help to Buy mortgage guarantee supported 18,564 purchases, backing mortgages worth a total of £2.7bn. Of the £12bn worth of guarantees set aside, just £388m had been used by the end of June.
The Treasury said the scheme had allowed first-time buyers to access the housing market at a time when mortgage restrictions have locked many of the out.
“Out of a total of 48,393 Help to Buy completions to date, 82% have been made by first-time buyers,” it said.
The chancellor, George Osborne, added: “Help to Buy is working exactly as we intended. It’s helping first-time buyers on to the housing ladder. It’s a key part of our long-term economic plan, which is supporting hard working people to secure a better future for their families.
“Importantly, Help to Buy is also driving a big increase in house building in Britain, boosting the construction industry and increasing housing supply.”
The figures from Department for Communities and Local Government show that the mortgage guarantee scheme has so far supported two house purchases in Kensington & Chelsea worth a combined £999,950 and four in Westminster worth a total of £2.1m.
Although London and the south-east together accounted for 3,470 Help to Buy mortgage guarantees, or 19% of completions through the scheme, this was well below 36% of the total mortgage market the area accounted for.
In eight London boroughs there have been no properties bought through the equity loan part of the scheme. The figures show there have also been none in Blackpool.