Budget means higher house prices

Higher house prices and more transactions are the likely result of the Chancellor's package of measures to reactivate the property market, called Help to Buy, according to housing experts.

In yesterday's Budget, George Osborne announced that help for first time buyers to purchase newly built homes - called First Buy - would be extended to people who already have a home but want to move.

They will qualify for interest-free loans from the government to make sure they can put down a sizeable deposit.

And he announced a system of government guarantees for up to £130bn worth of mortgages, to open the market for older homes to thousands of buyers who can only put up a 5% deposit.

The mortgage guarantees will not be available until January next year, but mortgage broker Ray Boulger of John Charcol thinks the expectation of more house purchases will drive prices higher towards the end of 2013.

He had been forecasting a 2% rise. Now he thinks 3.5% is more likely this year, with a 20% jump in transactions expected next year. That could mean 100,000 more deals.

"Clearly if you put extra finance into the mortgage market, the net result is that prices will be higher," Ray Boulger says.

The impact may seem modest, but a market in which prices are increasingly steadily and the number of deals is rising would be a major shift from the past four years of stagnation.

Simon Rubinsohn of the Royal Institution of Chartered Surveyors says it's too difficult to forecast next year's prices, given the uncertain economic backdrop in the UK and the eurozone, but he can see a marked impact as well.

"Providing the mortgage guarantee scheme goes ahead and there's a big take up, prices will go up faster than we envisaged," he suggests.

Even forecasters who have been talking about a likely drop in prices have changed their view.

Ed Stansfield from Capital Economics had pencilled in house price falls this year and next year. Now he believes there will be no significant change.

There could be a substantial knock-on effect if Help to Buy enables people to move house when otherwise they would have stayed put.

"It'll mean more successful chains," explains Ray Boulger, "Other transactions will happen because the Help to Buy transactions have gone ahead".

The expanded First Buy scheme is designed to assist 74,000 to move to brand new homes over three years.