There have been many critics complaining that the housing market is going to inflate too quickly and create a housing bubble with the impact of the Government’s latest scheme to help boost mortgage lending and thus the purchase of newly constructed homes.  The new Help to Buy scheme is, according to experts, going to push the average house price up by nearly £50,000 over the next five years. While it will help those that fell into negative equity with the falling of house prices it will also put home purchases out of reach of many hopeful buyers.

The Centre for Economics and Business Research (CEBR) is estimating in a soon to be released report that the average house price level will pass the level seen prior to the recession by next year. The Help to Buy scheme is expected to add at least £1,000 to the purchase price of a house next year which will put the forecasted average house price in the UK at £227,000 and it will then reach £267,000 five years later in 2018. 

Author of the CEBR report, economist Daniel Solomon, remarked, “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.”

The Help to Buy scheme helps buyers purchase a newly constructed house by supplying the buyer with an interest free loan of 15% of the purchase price for a home up to £600,000. This allows the buyer to purchase with a deposit of only 5%.  This scheme which becomes available today, April 1, is expected to bring back first time buyers to the struggling housing market.