Foxtons and Persimmon go head-to-head on Help to Buy

Conflicting views of the government's flagship mortgage scheme this morning: in the blue corner, housebuilder Persimmon. In the red corner, estate agent Foxtons.

by Emma Haslett

Another day, another story about house prices that, depending on your position on the housing ladder, is either cause to celebrate or cause drown your sorrows. House prices rose last month at their fastest annual pace for more than three years. Caloo, calay.

According to the Halifax house price index, prices rose 6.9% year-on-year during October, their strongest increase since May 2010. That’s 0.7% up on September’s figure, and makes the average house worth a palatial £171,991.  

All fingers are, naturally, pointing at the government’s Help to Buy mortgage guarantee scheme as the cause of the uptick. Housebuilder Persimmon reckons it’s sold more than 3,000 homes through the scheme: in results this morning, it said weekly private sales had risen by about 45% year on year every week since the beginning of July. It’s made £650m of forward sales, up from £462m last year.  

Interestingly, though, it added that the first part of the Help to Buy scheme, under which the government provides buyers with an equity loan worth up to 20% of the property’s value, is the most popular part. The other part, launched at the beginning of October, provides government guarantees on 95% mortgages.

‘We believe that mortgages associated with the Help to Buy equity loan scheme will remain the preferred choice… given that interest rates for this product are significantly more competitive,’ said Persimmon.

Estate agent Foxtons (the Mini-mad one that everyone loves to hate) was more critical of the scheme. In its first interim statement since it floated in mid-September, it said that ‘it remains to be seen whether the recent government Help to Buy initiatives and the early signs of a pick-up in mortgage activity ultimately lead to a significant increase in market volumes’.

It’s worth pointing out that Foxtons is London-based, and high-end at that – so relatively few properties in its remit fit the ‘under £600,000’ criteria set by the government for the scheme.

Despite its scepticism in the Help to Buy department, the firm said that in the three months to the end of September turnover had risen by 17.9% year-on-year to £41.1m, while lettings and mortgage revenues rose by 9% and 63% respectively. Following the flotation, debts have been eliminated altogether. Not bad going.

It’s difficult to argue that the effects of Help to Buy are null and void: since the chancellor first announced the scheme in April, not only have house prices risen, but share prices of all the major housebuilders are all up. The worry now is about interest rates: raise them too fast, and the buyers who took advantage of the scheme will be forced into default as their mortgage payments become unaffordable. Raise them too slowly, and it’ll affect recovery. The government hasn’t put itself in an easy position…

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