PM defends Help to Buy amid fears

15:57 19 May 2014

Prime Minister David Cameron. Photo: Joe Giddens/PA Wire

Prime Minister David Cameron. Photo: Joe Giddens/PA Wire

David Cameron has defended the help to buy scheme amid warnings from Bank of England Governor Mark Carney that rising house prices could endanger the recovery.

The Prime Minister said the average help to buy purchase was valued at around £150,000 and the majority of deals had been done outside London.

Mr Cameron’s comments came as Rightmove confirmed house sellers’ asking prices rose by 8.9pc in the year to May, meaning the average property is on sale at a new record high of £272,003. The annual rate crept closer to the 10.4pc seen in October 2007 while a month-on-month increase of 3.6pc, or £9,409, was the highest ever seen for the time of year.

London led the way with a 16.3pc year-on-year increase, compared with a more modest 4.9pc in the rest of the country - suggesting that fears of a bubble were not borne out outside the capital.

Mr Carney has signalled he is ready to take action to cool Britain’s surging housing market amid fears that a new property price bubble could derail the economic recovery.

Speaking to the BBC, Mr Cameron said: “(The Governor) has the powers at his command to make sure bubbles don’t appear in our economy.

“What I would say, when we look at help to buy for instance, the average price of a house under help to buy has been something like £150,000, 85pc of the help to buy deals have been outside London and the south east.

“It is important to help young people to have a chance to own a home or a flat of their own and we must remain committed to that. We must do what we can to help.”

In new figures, Rightmove said 10 out of 32 boroughs in London saw annual rises of more than 20pc, with a 43pc increase in Tower Hamlets driven by cash buyers and investors in Canary Wharf and neighbouring areas.

Rightmove said that across the country demand remained strong but the supply of new properties to the market was still unable to keep pace.

Rightmove director Miles Shipside said: “The lack of fresh choice will frustrate buyers and lessen their negotiating power in popular locations as pent-up demand continues to be released.”

The figures come after fears of an overheating housing market failed to persuade the Bank of England to raise interest rates, with governor Mark Carney dampening expectations of an early hike.

The Government will take any advice from the Bank of England “very closely into account” when deciding on the future of Help to Buy, but indicated that it did not expect guidance from Threadneedle Street to be published until the autumn.

Mr Carney said on Sunday the Bank could adopt a range of measures - including imposing a new “affordability test” for borrowers and advising the Government to rein in its controversial Help to Buy scheme.

Downing Street said it was a policy “on which the Government has said that it will regularly take the Bank of England’s advice”.

The Prime Minister’s official spokesman said: “Is it a surprise that the governor of the Bank of England is being asked questions around this and talking about this? Of course not, because it is this Government that has given the Bank of England wider macro-prudential powers to consider asset risks wherever they may be in the economy.”

Asked if ministers would wait until autumn before making any changes, the spokesman said: “I think the right way to go about this is to look at this in a consistent and regular way. That is what the Government is doing.”

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