U.K. Home Deposits Plunge on Cameron’s Policy Help

The average deposit needed for a U.K. home purchase under the government’s Help-to-Buy policy fell 75 percent to 11,108 pounds ($17,800) after a new phase of the program started today, property website Zoopla Ltd. estimated.

The plan’s goal of a 5 percent minimum down payment means a home purchase is possible for less than 10,000 pounds in six of 10 regions in U.K., the London-based company said today in an e-mailed statement. The lowest average deposit required under Help-to-Buy is 8,129 pounds in the Yorkshire & The Humber area, where the typical price of a home is 162,588 pounds.

Prime Minister David Cameron last month said he would bring forward by three months the second phase of the plan, which allows people to buy a home costing as much as 600,000 pounds with a 5 percent deposit instead of the standard 20 percent down payment. The first part gave interest-free loans for buyers of newly built homes and began in April. That’s contributed to the strongest housing market since the financial crisis.

“House prices are beginning to rise, savings rates are low, inflation is consistently above target and wage increases aren’t keeping pace. It makes saving for a 20 percent deposit on a property very difficult,” Lawrence Hall, a Zoopla director, said in the statement. “The new scheme helps address that problem, making the first rung of the ladder much lower for would-be buyers who want to get a foot on it.”

Saving Billions

There are 665,000 homes for sale in the U.K. that are eligible for the second phase of the Help-to-Buy program, Zoopla said. Reducing deposits to 5 percent from 20 percent cuts the cost by 33,325 pounds on average. If all the eligible homes saw such a reduction, the total savings would be 22.1 billion pounds.

The lending program has drawn warnings from the International Monetary Fund and U.K. Business Secretary Vince Cable that it could over-inflate home prices. Bank of England Markets Director Paul Fisher on Oct. 2 said he didn’t see a bubble in the market and officials will be “vigilant” on risks from the housing market’s revival.

“I don’t see any evidence of bubble behavior as yet, with mortgage lending still subdued relative to what is likely to be normal levels of activity,” Fisher said in a speech.

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