Prime minister defends scheme and says there is no evidence of a problem as house prices are still way below their 2007 peak

This article is more than 6 years old

This article is more than 6 years old

David Cameron dismissed concerns from Labour and coalition ministers that the government's Help to Buy scheme may be feeding a housing bubble as he promoted its next phase.

The prime minister branded sceptics of the mortgage guarantees – such as the Liberal Democrat business secretary, Vince Cable, "London-centric" and claimed that in many parts of the country prices were "barely moving at all".

His defence of the government scheme came as he promoted new figures which claim to show that more than 6,000 people have put offers in on homes and applied for mortgages using Help to Buy since it was launched about three months ago.

Nearly 750 homeowners have completed their purchases and hundreds were able to spend Christmas in their new homes, according to official figures.

Cameron said the initiative meant people without wealthy parents and a big deposit could "realise their dream" of owning a home, and he rejected concerns that high demand was already overheating the market.

"Where we are today, house prices are still way below the peak they reached in 2007," he said.

"Forecasters do not think they will get back to the level before the crash even in 2019. So there is no evidence of a problem.

"This is about helping people to achieve the security and stability they want of owning a flat or a home of their own," he said.

The Help to Buy scheme provides equity loans of up to 20% for buyers of new-build homes in England and part-guarantees mortgages for buyers across the UK.

Last July Cable warned that the scheme, which is meant to revive the housing market, could inflate it. "I am worried of the danger of getting into another housing bubble," the business secretary told the BBC's Andrew Marr Show.

But Cameron on Thursday said that housing prices in many parts of the country were barely moving at all.

"Nationally, excluding London and the south-east, house prices are up just 3% over the last year.

"I think there are some people who are rather London-centric about this," he said.

In November ministers published figures showing that in the first month after being launched more than 2,000 people had put in offers on homes and applied for a Help to Buy mortgage. That number has now trebled.

The mortgages, once approved, would represent nearly £1bn of new lending to aspiring homeowners who may have previously found the property market out of reach because of the size of deposit required.

Barclays and Santander will introduce their own Help to Buy products on to the market this month, joining Lloyds Banking Group, RBS, HSBC, Virgin Money and Aldermore, who have all launched products over the last three months.

The expansion will mean two-thirds of the entire UK mortgage market will offer products under the Help to Buy scheme, bringing home ownership to a growing number of people.

Other figures claim that an additional 20,000 households have also been supported by the Help to Buy equity loan scheme, a separate scheme where the government provides an interest-free loan to support the purchase of the newly-built home.

On average applicants are looking to buy homes worth £160,000, which remains below the UK average house price of £247,000. They will face average monthly repayments of around £900 and have an annual household income of around £45,000. This means a Help to Buy mortgage represents 23% of borrowers' gross income.

Labour has called for an increase in housebuilding, which it claims is at its lowest level since the 1920s. Shadow ministers have previously expressed concerns that the scheme is stoking demand but doing nothing for supply, which could result in a future steep rise in prices.

Shadow housing minister Emma Reynolds said : "Any help for first-time buyers struggling to get on the property ladder is to be welcomed. But rising demand for housing must be matched with rising supply if this scheme is to bring the cost of housing within the reach of low- and middle-income earners.

"You can't deal with the cost-of-living crisis without building more homes. That's why Labour has committed to building 200,000 homes a year by 2020," she said.