[Mr James Gray in the Chair] — First-time Buyers

Part of the debate – in Westminster Hall at 10:47 am on 14th March 2012.

Alert me about debates like this

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 10:47 am, 14th March 2012

The hon. Gentleman knows as well as I do that the scheme ends on 24 March 2012. No doubt some will try to get in before then. Indeed, a review has to take place at a certain point and, on the broad thrust of a year, if figures such as those I mentioned have been achieved, it is unlikely that it would continue to be a sustainable way to support first-time buyers.

Let me turn now to the point of the debate, which is to query how we can best support those who wish to enter home ownership. There has been a clear correlation in recent decades between wider economic problems and volatility in the housing market. The best thing that we can do, first of all, to support the housing market is improve the country’s financial and macro-economic stability. That is why we are taking action to get public finances back on an even keel. Only through that action will we give people the confidence to invest in new homes and allow the building industry to go ahead and build the homes that we need.

We need to tackle the underlying structural issues that have had such negative consequences for the housing market. That is why the Government are taking action to improve stability in the credit markets and are reforming the planning system. Without such reforms we will face cyclical problems, time and again, of the sort experienced in recent years. However, we understand that we need to help people now, which is why we are taking action to help first-time buyers and other purchasers own their own home.

The effects of the recent financial crisis were particularly pronounced for first-time buyers, as mortgage lenders have cut back on low-deposit products. I can confirm, from Government figures, that the average age of an unassisted first-time buyer is 37, compared with 33 before the crisis. The Government are taking action now to help first-time buyers and others to attain home ownership.

On Monday, the Prime Minister launched the NewBuy scheme, which will deliver a significant increase in housing supply—I have already put numbers to that—and access to affordable mortgages for those without large savings who wish to purchase a new home. The scheme is not aimed at borrowers who cannot afford the mortgage, but at borrowers who lack the savings to fund a deposit, giving creditworthy borrowers a leg-up in the property market. I should like briefly to note hon. Members’ comments about second-steppers, who are important and have serious contributions to make in our effort to get the housing economy moving.

Detail on products is available to Hon. Members who wish to look for it, but I can confirm that although prior to Monday there were no 95% loan-to-value new build mortgage products on the market, today buyers will now be able to purchase a new build property with a 5% deposit. Builders are partnering with lenders to offer 90% to 95% mortgages. Three lenders are offering new mortgage products in that arena. We expect more builder-lender relationships and associated mortgage products to be confirmed over the coming weeks and months. This means that, in total, the Government have made provision to help up to 100,000 families and young people to buy their own home.

We are committed to invigorating the right to buy, which hon. Members have applauded in today’s debate. On Monday, the Prime Minister announced that we will support social tenants who aspire to own their own home, by raising the discounts to make it attractive to do so across England. Right to buy has already helped nearly 2 million people since its introduction, but discount rates were reduced by the previous Government and the number of sales fell dramatically. From 2 April the discount limit will be raised to £75,000 across England, so in London, for example, it more than quadruples the current limit. It will help thousands of people realise their home-owning aspirations. However, we are also committed to ensuring that it does not erode the social housing stock, which is why for every home bought under right to buy a new affordable home will be built.

NewBuy and right to buy sit within a broader suite of options intended to help first-time buyers and others into home ownership. Firstbuy, which was announced in Budget 2011, is a fixed-term measure designed to support the housing market, given constrained credit availability and challenging economic conditions. Under that scheme, the Government and around 100 house builders are together providing some £400 million to assist almost 10,500 first-time buyers to purchase with a 20% equity loan a new build property in England by spring 2013. We have had more 4,250 reservations since the scheme opened in September. The three largest participating house builders have reported sales of more than 1,200 homes in the first four months. Hon. Members will agree that those results show that the Government are taking action now, as needed, to support those who wish for the first time, or indeed at other times, to be a home owner and to continue to build the kind of communities that we all aspire to see throughout the country for our children and grandchildren.

Once again I thank my hon. Friend the Member for Winchester for his reasoned, thoughtful and passionate contribution to the debate that he has given us the opportunity to participate in. I thank other hon. Members who have made equally passionate and inspiring contributions on what we all hope for those we represent.