Some people think it’s the worst thing to hit Britain since the bubonic plague. Others claim it’s the engine of Britain’s economic recovery. So why does the Help to Buy Scheme arouse such violent passions?
It’s political, that’s why. If you think about it, the scheme is a classic government subsidy – something you’d associate with Labour – but introduced by a right-wing Tory chancellor. No wonder it’s got the chattering classes in a frenzy.
But first things first. What exactly is the Help to Buy scheme?
It all began in last year’s budget, when George Osborne said that anyone who wanted to buy a new-build home could borrow 20% of the property’s value from the British taxpayer. This loan would be interest-free for five years. All the homebuyer needed was a 5% deposit and a 75% mortgage.
Then, towards the end of last year, a second phase kicked in. This time, the Government said it would guarantee up to 15% of a mortgage as long as the buyer came up with a 5% deposit. Basically, that’s a carrot to the banks to provide 95% mortgages – and get more people on the housing ladder.
So those are the numbers. What about the effects?
George Osborne’s big idea was to stimulate demand for housing, and thus boost the ailing economy. Well, it seems the first phase increased new home building by 10% compared to the previous year. And the economy? Happily, the OECD reckons Britain will grow by 2.4% this year.
As for the second phase, official figures show that 6,000 people have applied for the new mortgages in the two months since they became available. So what’s not to like?
Well, some commentators believe the whole thing is reckless and crazy. They think that, without a vast home-building programme, the scheme will send house prices rocketing again – and that’s exactly what put home ownership out of reach of so many people in the first place.
Others point to the fact that it was an avalanche of unsustainable mortgages that caused the global financial crisis of 2007/8 – and look at the mess that got us into.
But, as with everything in politics, there are arguments on both sides. House prices in London may have jumped 10.6% in the last year, but the average across England and Wales is a more meagre 3.2%. And house sales are still well down on the big numbers of the boom years.
As for dodgy mortgages, the entitlement rules are much stricter now. The scheme doesn’t apply to people buying second homes, plus if you have a county court judgment against you for more than £500, you’ll be told to sling your hook.
So is Help to Buy a good thing?
Well, it all depends where you stand. However, if you’re standing in the home you thought you’d never own because it was financially out of reach, it’s a no-brainer.