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Help to Buy – a pessimistic first time buyer’s perspective

Tom thinks Help to Buy is an irresponsible scheme that will push a whole generation into needless bankruptcy.

August 1, 2013

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When I was 17 I crashed my parents’ car into our neighbour’s BMW. I had been learning to drive for a few months and decided I was ready to go out alone – the only problem was that I didn’t have a licence.

I didn’t get further than the next street before I lost control. The result was devastating – I had to admit what I’d done and ten years later I still don’t have a licence and can’t imagine feeling comfortable behind a driving wheel again.

Nobody encouraged me to act irresponsibly – it was my own bad decision and I’ve had to pay the consequences.

On Tuesday, George Osborne announced details of the Help to Buy mortgage guarantee scheme. He plans to give first time buyers the green light to rush into a hostile market and take on £130bn of potentially devastating debts.

The plan is equivalent to handing the car keys to a generation of teenagers who still haven’t passed their driving test and waiting to see what happens.

It won’t be the first time banks have offered people loans they can’t afford. The last time it happened an economic crisis followed – countries went bust, people lost their lifesavings and bankers resigned with only their massive personal fortunes and multi-million pound pay-offs to console them.

Osborne says that won’t happen this time because borrowers will have to undergo income checks and “stress testing” to make sure they can afford to pay back the loans.

But, if he’s wrong, the banks won’t have to worry. The loans are guaranteed by the Government (i.e. the taxpayer) and, if anything goes wrong, the Government (i.e. the taxpayer), not the banks will foot the bill.

The scheme will undoubtedly be popular. The first stage – which provides loans of up to 20 per cent of the value of a new-build property worth up to £600,000 – has had 7,000 signups since it launched in April.

And some first time buyers could make it work – there’s always an incentive to get on the housing ladder and start paying off your mortgage as early as possible.

Some buyers might find ways of making money from their homes, which could eventually help them pay off the huge and crippling debt that the Government has encouraged them to take on.

It could even be a consolation to borrowers to know that those debts could one day help bring the country out of recession.

But if things do pick up, so will interest rates, and our massive taxpayer-guaranteed mortgages will become huger and more crippling, potentially leaving a generation homeless and bankrupt.

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