House prices "will overtake pre-crisis peak by next year thanks to government"s new help-to-buy scheme"

House prices 'will overtake pre-crisis peak by next year thanks to government's new help-to-buy scheme'House prices will hit record highs while millions can't afford to buy home 130billion scheme will 'add 1,000 to the price of a property next year'

By
Becky Barrow

PUBLISHED:

20:52 GMT, 31 March 2013

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UPDATED:

07:38 GMT, 1 April 2013

The cost of the average home will jump by nearly 50,000 over the next five years, partly fuelled by the Government’s mortgage lending scheme, a report reveals today.

The Centre for Economics and Business Research said house prices will pass their pre-recession peak next year and will go on to hit record highs at a time when millions cannot afford to buy their own home.

The economic consultancy predicts the 130billion lending scheme, unveiled in last month’s Budget, will add more than 1,000 to the price of a property next year.

The Centre for Economics and Business Research said house prices will pass their pre-recession peak next year

The Centre for Economics and Business Research said house prices will pass their pre-recession peak next year and will go on to hit record highs at a time when millions cannot afford to buy their own home

Under the plans, it will be easier for a person with a deposit of only five per cent to get a loan because the Treasury will ‘guarantee’ 15 per cent of the mortgage.

The report is the latest warning that the so-called ‘Help to Buy’ schemes will fuel house price increases.

Last week, Steve Nickell, from the Office for Budget Responsibility, told MPs on the Treasury Select Committee: ‘Is it just going to drive up house prices By and large in the short run, the answer to that is yes.’

Under new plans, it will be easier for a person with a deposit of only five per cent to get a loan because the Treasury will 'guarantee' 15 per cent of the mortgage

Under new plans, it will be easier for a person with a deposit of only five per cent to get a loan because the Treasury will 'guarantee' 15 per cent of the mortgage

Overall, the CEBR’s report said house prices will reach an average of 227,000 next year, and continue to rise after that.

By 2018, the CEBR forecasts the cost of the typical UK home will be 267,000.

This means house prices are set to rise by 20 per cent over the next five years from around 222,000 today to 267,000, an increase of nearly 45,000.

The average worker with a full-time job currently earns 26,500, which means homeownership is far beyond their means, unless they have wealthy parents who can help.

Official figures show house prices are currently falling or stalling in most parts of the country, except London and the South East where they are rising sharply.

Economist Daniel Solomon, who wrote the report, said: ‘By 2018, we expect the typical UK home will cost 267,000, over 20 per cent more than this year.

‘Gradual wage and population increases will be the fundamental drivers of this medium-term trend.

‘We expect the Chancellor’s new Help to Buy scheme will push up house prices before it raises housing supply.’

Although full details of the scheme have not yet been published, the CEBR predicts it could ‘raise prices by up to 0.8 per cent in 2014 without having any appreciable impact on housing supply’.

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