The Government is persistently defensive about its Help to Buy scheme, partly
because the criticism has been so consistent.
Two parts of the scheme have been rolled out by David Cameron in an attempt to
improve the route to property ownership, or in his emotive words: “As
prime minister I am not going to stand by while people’s aspirations to get
on the housing ladder are being trashed.”
In a nutshell, the first part of the scheme, launched in March of last year,
makes sense because it is only available on brand new homes. Increasing
demand, therefore, encourages the building of more new houses. This is an
attempt to lance the boil of Britain’s supply and demand problem. It should
The second part, launched in a rush last autumn, is open to all – first-time
buyers, movers and on homes of any age. The Government puts up taxpayer
money to guarantee a chunk of the mortgage (explained below).
It is this part of the scheme that has attracted much criticism, viewed as a
yet another way to curry favour with voters, keeping house prices
artificially high, and rising.
today were used to show how the second part of the scheme is mainly
helping buyers outside London and the South East.
“Compared to total mortgage completions in each region, the scheme is
supporting a higher proportion of mortgages in the North West and the East,
and a lower proportion in London and the South East,” the Treasury
The statistic is valid but the numbers, as ever, are open to interpretation.
There are some other eye-brow raising statistics found deeper in the data
• As a percentage of the total, the North West and the South East saw the most
completions, both with 14pc each (the actual number was 1,027 vs 1,011);
• The “mean borrower income” for successful Help to Buy
borrowers in London was £80,395.
The second of these numbers is the most eye-catching, especially when compared
to the £49,046 average nationally. It is distorted by some being based on
joint incomes, although the proportion is not disclosed.
The pundits with a vested interest in keeping the scheme – the estate agents
and lenders – will be keen to draw on the Treasury’s report as validation of
its success in helping priced out buyers in weak property market regions.
The true picture is a good deal more complicated than that.
Rather than declare success, the Government should recognise the £1bn of
mortgage debt being guaranteed by taxpayers on Help to Buy 2, also disclosed
today, could have been more wisely deployed on boosting Help to Buy 1, which
simultaneously would have helped tackle Britain’s acute property shortage.
This £1bn is just the start of a process that will build up debt problems for
future governments and encourage borrowers to overstretch. Help to Buy 2
will eventually guarantee £12bn, covering up to £130bn of mortgage lending.
How the Help to Buy schemes work
Help to Buy 1: This was announced last March and started in April 2013.
It is an equity loan that allows people taking their first step on to the
property ladder to borrow up to 20pc of the value of a new-build home from
the Government, interest-free for the first five years.
Borrowers need a minimum 5pc deposit and must take out a mortgage to cover the
remaining 75pc of the cost of the property, which can be worth up to
£600,000. The Government has set aside £3.5bn to help up to 74,000 home
buyers through the scheme, which was intended to run until March 2016 but
was extended until 2020.
Help to Buy 2: This was also announced in the Budget but was designed
to start in Janauary 2014. It was suddenly bought forward to launch in
September 2013 with little notice.
The mortgage guarantee scheme, which is designed to help first-time buyers and
existing property owners move up the housing ladder, will allow borrowers
with a 5pc deposit to buy property worth up to £600,000.
The Government will guarantee up to 15pc of the loan at a cost to the lender,
allowing the borrower to access cheaper mortgage deals. It has set aside
£12bn of guarantees for up to £130bn of mortgage lending and the scheme will
remain open for three years.
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