Help to Buy Disaster Looms

In its rush to stimulate the economy and the housing market the Government has recently announced its Help to Buy scheme offering to lend home buyers 20% of the value of a property, making it possible to borrow up to 95% of its value in the form of a mortgage.

Starting in 2014 it does on the face of it sound great, home buyers will be able to buy houses fast with the comfort of knowing they only need a 5% deposit, thus stimulating the market and driving a sluggish housing market forward. Aimed at trying to make the dream of owning a home possible again this should be applauded of course, or should it?

Unfortunately it’s not the view of everyone, including the outgoing Governor of the Bank of England, Sir Mervyn King. Who has expressed his reservations.

He is quoted as saying “This scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the [financial] crisis, and we need to get back to that healthy mortgage market.

“We do not want what the United States have, which is a government guaranteed mortgage market, and they are desperately trying to find a way out of that position.”   This type of  “Government Interfering in the housing market” has been labelled a “disaster” by Treasury Select Committee member John Mann MP.

Whatever the outcome, there is £12 billion pounds being committed to the project, and only time will tell whether this election minded policy will have the affect intended. If not and house prices drop again it could merely leave swathes of people in negative equity, this time with unprecedented levels both personal and government debt.

The spectre of more people facing Repossession could beckon and irrespective of who may win the next election it could be both the home buyers and the Tax Payer having to pay for it for a very long time.


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