Help to Buy off to 'flying start' as house prices rise

500 people a week are taking advantage of Help to Buy

The government's flagship Help to Buy housing scheme has got off to a "flying start", according to the industry.

The Home Builders Federation (HBF) said that 4,000 people have reserved a new home in the two months since the scheme launched.

Separately, the Halifax said that UK house prices are now rising at their fastest rate since September 2010.

Prices in the three months to May were 2.6% higher than in the same period a year ago.

That news will add to criticism that Help to Buy is likely to boost prices artificially, and make homes even more unaffordable.

The first part of the government's Help to Buy scheme began in April.

It allows buyers to put down a deposit of just 5%, and take out an equity loan from the government for up to 20% of the property's value.

Inflation

The HBF said interest in Help to Buy had been "huge", with over 500 a week taking advantage of the scheme.

The second part of the Help to Buy Scheme, when the government will guarantee mortgages, does not start until January next year.

But the HBF is hailing part one a success.

"The Equity loan part of Help to Buy has got off to a flying start," said Stewart Baseley, the executive chairman of the HBF.

"Four thousand reservations in just two months shows both the consumer demand for the scheme, and developers' commitment to it," he said.

But Help to Buy has been heavily criticised by many leading economists, for helping to inflate house prices.

The governor of the Bank of England, Sir Mervyn King, said the scheme should not be extended.

It is currently due to run until 2017.

Subdued demand

The Halifax house price index shows that in the shorter term house prices have edged up modestly.

Prices in the three months to May rose by 1.5%, compared with the previous three months.

In April that same measure showed a 1.3% rise.

But Martin Ellis, the Halifax's housing economist, believes demand is still subdued.

He said poor economic conditions, and weak income growth "continue to be a significant constraint on housing demand and activity".

Recent figures from rival lender Nationwide suggest the annual rise in house prices is much weaker.

It said that prices in May were 1.1% higher than a year ago, compared with the Halifax's 2.6%.