The prime minister defends the government’s mortgage guarantee scheme and says critics who fear it could overheat the housing market are being “London-centric”.
New government figures show almost 750 homeowners have completed house purchases since the scheme was launched in October.
Help to buy allows borrowers to secure a mortgage with a deposit of as little as 5 per cent, with the government offering the lender a guarantee on part of the loan.
Some economists, including the governor of the Bank of England, Mark Carney, and the business secretary, Vince Cable, have questioned the wisdom of the scheme.
But David Cameron said there was no evidence that it was fuelling a property bubble, saying house prices were still below their pre-crash peak.
Today’s figures show that 6,000 people applied for a help to buy mortgage in the first three months. Almost 750 people have completed purchases and hundreds of buyers were able to spend Christmas in their new home.
The government said the lending amounted to £1bn of credit that would otherwise not have been available to borrowers lacking the capital for a deposit.
It said the average home was worth £160,000 – well below the UK average house price of £247,000 – and some 80 per cent of mortgage applications come from first time buyers.
The average applicant pays around £900 a month, or £10,800 a year, and has an average household income of around £45,000 before tax, the government added.
Help to buy has been widely linked to recent rises in property prices.
In the 12 months to October 2013 UK house prices increased by 5.5 per cent, the highest year-on-year change since September 2010, according to the Office for National Statistics.
But there are big differences in different parts of the UK. Only in England are prices higher than the pre-financial crisis peak of January 2008.
London showed the biggest increases by far, with prices soaring 12 per cent. Excluding London and the South East of England, UK house prices increased by 3.1 per cent in the year to October 2013.
Mr Cameron said today that three quarters of help to buy mortgage applications were from people living outside London and the South East.
And he quoted research by the estate agency Knight Frank which predicted prices will not recover to 2007 levels until 2019 – or 2031 in real terms.
Mr Cameron said: “Where we are today, house prices are still way below the peak they reached in 2007. 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.
“We are not helping people to buy flats or homes they cannot afford. We are helping people who do not have wealthy parents, who cannot get a big deposit together, and helping them to realise their dreams.”
He added: “I think if you look across the country, there are many parts of the country where house prices are barely moving at all.
“Nationally, excluding London and the South East, house prices are up just 3 per cent over the last year. I think there are some people who are rather London-centric about this.”
Economists from the Institute of Directors, the Institute Monetary Fund, Capital Economics and Societe Generale have joined former analysts from the Bank of England in criticising help to buy as misguided.
A Financial Times poll of leading economists this week found that most were in favour of building more housing to calm frothiness in the housing market.
Last month, Professor James Mitchell from Warwick University said property prices were overvalued compared to incomes in 10 out of 13 regions in the UK.
Professor Mitchell calculated that there was a 77 per cent probability that the UK is in the grip of a housing bubble and could see prices crash in the future, rising to 93 per cent in London.
Other economists have played down the chances of a price crash, saying mortgages are still relatively affordable compared to the cost of renting property.
In October the Bank of England’s markets director Paul Fisher said he did not see any evidence of bubble behaviour but said the Bank would “keep a close eye” on the housing market.
Labour’s 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.
“Instead, under this Government, house-building is at its lowest level since the 1920s.
“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.”