The Telegraph’s editorial says that the Government’s Help to Buy scheme is almost too successful, having been taken up by nearly 7,000 first-time buyers.
It adds that the prospect of the second phase of Help to Buy, which will cover all properties valued at less than £600,000, rather than just new-builds, is sending house prices upwards, which in turn will mean that property is less affordable for those very first-time buyers, making them more dependent on government help.
The Telegraph’s view is somewhat shared by the Institute of Directors who have described guarantees for low-deposit mortgages as dangerous, and warned that the scheme risks creating a housing bubble.
The FT’s John McDermott says that he believes the scheme is misguided.
He outlines the similarities (and differences) of the scheme with that of subprime loans, which many blamed for creating the financial crisis in America. A separate article in the same paper says that the Help to Buy announcement by the Treasury shows how the department is ramping up pressure on housebuilders to increase production.
Source: The Independent, The Daily Telegraph, Financial Times
We say: This is just an utterly unspeakably ludicrously incoherent policy – the worst idea since Eric the Red bought 3,000 Viking helmets with the horns on the inside. At a time when house prices are at an all-time high a policy aimed at further stoking up a demand which already greatly exceeds supply is simply ridiculous.
Furthermore, the scheme does not even have the small saving merit of being targeted at those in most need – does Mr Osborne really believe that, in these times of austerity and economic stringency, people who aspire to buy £600,000 houses are most in need of whatever assistance can be afforded from limited public funds?