Newbuild price inflation slowing under H2B 1

The research revealed an annual growth of new build prices across the UK has fallen from 4% to 2% in the last twelve months.

Every region with more than 1,500 Help to Buy equity loan completions has seen new build price growth slow down over the last year and experienced less growth of new build prices compared with prices across all homes.

In five of the seven regions where the equity loan scheme is most active, new build prices have also risen slower than the UK new build average.

Instead of driving up the cost of new build properties, it suggests that Help to Buy 1 is successfully boosting access for first-time buyers by increasing supply and helping to keep prices in reach.

Buyers using the Help to Buy equity loan scheme are typically paying 22% less than the UK average new build price to get on the property ladder.

Data from Mortgage Advice Bureau’s National Mortgage Index shows that house purchases using Help to Buy equity loans have averaged £186,477 in 2014 so far.

This is £3,523 (2%) lower than the average price paid by first time buyers across all properties according to the ONS House Price Index and £51,523 (22%) less than the average price of a new build home.

It indicates that equity loans are improving access for entry-level purchases in the new build market and reducing the financial strain on first time buyers without fuelling competition for new homes at the top of the scale.

With an average mortgage of £136,780, equity loan applicants are typically borrowing 73% of their property’s value from their lender.

By drawing on the maximum 20% equity loan from government, this would leave them needing to find just £13,053 for a deposit, equivalent to 40% of their average annual income (£32,668).

Getting the same loan to value deal on the same property without the equity loan would almost quadruple the deposit needed to £50,349: more than one and a half years’ earnings.

The Index also shows that applicants for Help to Buy equity loans so far in 2014 have been five years younger on average than the typical buyer seeking a mortgage (32 vs. 37) and earn 16% less (£32,668 vs £38,806).

Andy Frankish, new homes director at Mortgage Advice Bureau, said: “These findings show what good sense it makes to extend the Help to Buy equity loan scheme until the end of the decade. Buyers are taking advantage of government help to make entry-level purchases rather than chasing properties at the top end of the market.

“The scheme’s arrival has also worked wonders to keep the costs of buying a new build home down. Improving the supply of housing is having an immediate and powerful effect on house prices by keeping inflation in check and avoiding a scenario where aspiring owners are priced out of the market.

“Help to Buy equity loans are proving a roaring success by opening up the entry point to the property ladder and helping first time buyers to make their sums add up. Developers will take confidence from public backing until 2020 and can use this window to address the housing shortage left by the construction slowdown.”