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Can the Help To Buy Scheme be to blame for the UK property price inflation?

New official statistics have been released by the HM Treasury today detailing that some 7,313 homes have been sold so far under the 2nd part of the Help To Buy mortgage guarantee scheme covering the six months from 8th October 2013 to 31st March 2014; a further 20,548 new homes were sold through the scheme’s first instalment during the 13 months proceeding this.

It cannot be argued that the scheme has indeed helped a lot of hard working people successfully get on the housing ladder, however, sceptics are saying that a lot of these would have been able to obtain a mortgage anyway and has actually represented a much lesser proportion of the total number of homes sold during this period that had originally been hoped.

While the scheme has been lauded as a success by David Cameron and the government in boosting the housing market, with 85% of the properties sold going to first time buyers, several sources have sited it as a possible cause for the recent property price ‘bubble’ which has seen prices rising significantly across the UK by an average of 8% a year and by 17% a year specifically in London, according the Office for National Statistics.

Source: HM Treasury Twitter

The graphic above shows the variation in the % of regional lending attributed to the Help To Buy Scheme; this highlights its relative lack of impact on the Capital, only representing less than 1% of total property sales in the region thus undermining the critics’ negative viewpoint.

Blackstock property expert Andrew Teacher said: "Today's figures reinforce the fact that Help to Buy has not helped to blow up the London market as numerous commentators have suggested. The figures show the scheme has been most effective in areas of reduced growth where prices have remained relatively flat."

The average value of each mortgage taken out under the scheme was £136,742, the mean value of a property purchased being £151,597, this compares to a national average house price in the UK of £252,000 so it can be said with confidence that its impact has indeed been a lot greater in regions outside London.

Effects on Sterling

There are many factors involved when considering the spike in UK property prices which in turn has been held responsible for the recent pressure on the GBPUSD exchange rate but it is difficult to argue, it seems, that the Help To Buy Scheme is necessarily one of them.

Our recent article on Cable highlighted some of the technical factors affecting the price of sterling and the pressure which was growing on it; since this article was published on the 6th May, the price has plummeted nearly 300 pips from 1.6981 to the current level of around 1.67.

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