First-time Buyers

Chloe Smith Excerpts

Wednesday 14th March 2012 Westminster Hall

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I start by joining the round of congratulations to my hon. Friend the Member for Winchester (Steve Brine). He has not only secured an important and topical debate, but spoken with real passion. I pleased to respond on behalf of the Government, both to him and to those who have also contributed with passion, whether from Blackpool, Milton Keynes, Cornwall or elsewhere. We have heard about homes, homelessness, history and our hopes for our children. We have heard about stalled development and proper community development, which I will touch on briefly. If Mr Gray will forgive me, I will also insert a small piece of history from my own constituency of Norwich North. I believe that the Mile Cross estate was the first council estate in England built outside London, something that I am very proud about. I shall stop there, before Mr Gray tells me to sit down.

My hon. Friend the Member for Winchester highlighted the package of support that the Government have introduced to help people own their home, and I will set out our progress on that. Before I do so, I will deal with some of the questions that were asked about the detail, principally by my hon. Friend. He asked whether NewBuy could be extended to existing properties, not just new properties. NewBuy builds on an industry-led scheme. That is very important, because it builds on support from both builders and lenders. It makes homes affordable, it stimulates economic activity, and, crucially, it increases supply.

The Home Builders Federation estimates that new build could deliver 25,000 additional homes in three years, supporting in turn up to 50,000 additional jobs, which I think all hon. Members will agree represents a real boost to the economy at a time when it is most needed.

On new versus existing, it is important to state that home building and the supply of new homes at present is not meeting the demand in the economy, so there is a pressing need for new build in that sense. A scheme focused on existing homes would be different and could have different financial consequences.

My hon. Friend also asked about the first-time buyer discount on stamp duty land tax, as did the hon. Member for Pontypridd (Owen Smith). Hon. Members will be aware of a review by Her Majesty’s Revenue and Customs in November 2011, which brought forth some staggering numbers that they may not be aware of. The review indicated that only 1,000 of the additional first-time buyers who bought a property between April 2010 and 2011 would not have purchased it without the relief. That 1,000 figure is derived from the 118,000 first-time buyers who used the relief, of whom it is believed 117,000 would have done so anyway. Hon. Members will agree that those remarkable numbers suggest that the relief was not effective in increasing the numbers of first-time buyers entering the housing market.

[Owen Smith]

Will the Minister give way?

[Miss Smith]

Before the hon. Gentleman asks me further questions, I must address his point about the cost of furthering the relief for a year being estimated at £150 million. I hesitate to give way to him, because in his comments and the questions that he asked me, he once again showed his party’s rather tenuous grip on credibility—if he thinks that such a sum represents value for money in helping first-time buyers and other purchasers. He then quibbled about whether the scheme that I shall outline really helps first-time buyers. He must ask serious questions if he thinks that £150 million spent in that way furthers that aim with no dead weight.

[Owen Smith]

rose—

[Miss Smith]

If the hon. Gentleman would like to justify that, I am happy to hear him.

[Owen Smith]

I would have to look at the numbers before lending them any credibility. It would also make sense for the Minister to concede that her comments are based on numbers predicated on a scheme that has not yet ended. She is talking about November numbers, whereas the scheme runs through to March. The Council of Mortgage Lenders suggested that there has been a 20% increase in the intervening period, which will radically change the figures.

[Miss Smith]

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. Therefore, 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.