The North East’s housing market must not be killed off to keep London from overheating, one of the region’s leading Liberal Democrat peers has warned.
Former Port of Tyne chairman Lord Wrigglesworth has hit back at Government critics who say the successful Help to Buy scheme is causing a housing bubble.
The Lib Dem party treasurer said dropping the scheme would do nothing to control London prices, but would hinder a recovery in house prices in regions such as the North East.
The latest figures showed that 1,500 households in the North East have been helped to buy a new home thanks to a Government loan or mortgage guarantee.
Speculation has been mounting that the Bank of England could try to restrict the Help to Buy scheme in an attempt to calm London’s housing market down.
Lord Wrigglesworth told the House of Lords: “I plead with those who want to start taking national policy decisions that will affect the markets outside London not to think that taking steps on the Help to Buy scheme is going to affect anything in central London.
“Frankly, I am not sure that there is much that the Government can do, unless it is a very radical policy, to affect the central London housing market anyway. How do you control overseas investors and the cash that is going in?
“You can control the mortgages and sustain the banking system, but you would find it very difficult to stop the money coming into the London housing market from the places from which it is coming in at the moment.
“That is one plea that I make. In future, these decisions will be extremely difficult if we are to sustain the confidence to which I referred.” The former MP told peers: “There is no national housing market, and some very misleading debate takes place on that issue.
“It is grossly misleading to talk about the average house price without taking into account all the regional differences in the country.
“According to Economic Research Council figures, across England and Wales, house prices have increased by 6.7% over the past year, but remain about £10,000 below their peak price in late 2007.
“However, and I quote from my own experience, in the North East prices have increased by only 2.9% over the past year and actually fell in April, compared to March. Compared to their peak price, homes in the North East are still £30,000 cheaper than they were in 2007.
“Differences between the North East and the national average are small when compared with the London market, where there has been an annual increase of 17% and prices are now £90,000 higher than at the previous peak of 2007.”
Under measures introduced by chancellor George Osborne, the Government lends buyers up to 20% of the cost of a new-build home, so that they need only a 5% cash deposit and a 75% mortgage to make up the rest.
New figures show that 1,250 households benefited from this scheme in the North East, including 101 in Northumberland, 127 in Sunderland, 118 in Newcastle and 117 in Gateshead.
The Government also offers mortgage guarantees on any home, whether new build or not, effectively allowing people to borrow more. This option has been taken up by 308 households in the region.
Younger property owners are more likely to have relied on measures such as mortgage terms of more than 25 years, loans from family and the Help to Buy scheme, research from the HomeOwners Alliance found.