Rics says more Help to Buy will only inflate house prices

A REVIVAL of Help to Buy-style schemes will drive up house prices and won’t help people on to the housing ladder, Jeremy Hunt has been warned.

The Royal Institute of Chartered Surveyors’ (Rics) chief economist has said policies that let people buy a home with a smaller deposit would only serve to push up prices and threaten to make affordability issues even worse.

Simon Rubinsohn, chief economist at Rics, said: “My concern is that in an environment where supply remains relatively constrained, measures that encourage demand are likely to at least in part result in higher prices and even more strained affordability.”

His comments come as Mr Hunt, the Chancellor, looks at introducing policies to support first-time buyers in his spring Budget. One option being considered is a revival of Help to Buy.

More radically, Mr Hunt is exploring plans to introduce a 99pc mortgage that would let first-time buyers get on the ladder with just a 1pc deposit, in a move first reported by The Independent.

A source close to the Chancellor said the Treasury was evaluating “early options” on how to improve home ownership but stressed any final decisions would depend on the Office for Budget Responsibility’s public finance data.

Last year, the number of first-time buyers fell to its lowest in a decade as prospective purchases were hit by a double blow from the end of Help to Buy and soaring mortgage rates. A Treasury spokesman said there was already an existing scheme providing a 95pc loan-to-value mortgage which has “so far enabled over 39,000 households to buy a home – over 86pc of which are first-time buyers”.

Help to Buy, launched in 2013, allowed first-time buyers to purchase a new-build property with only a 5pc deposit with the Government providing an initially interest-free loan to cover the rest of the down payment.