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Help to Buy – a round up of the latest expert opinions

Help to Buy is proving a divisive issue, with some experts claiming it will kick start the UK housing market and others worrying that it will drive up prices and cause another bubble - we look at the latest views on the scheme.

September 5, 2013

Greg Clark, financial secretary to the Treasury and MP for Tunbridge Wells wrote on the Conservative Home Blog that Help to Buy was designed to address the obstacle of deposits to home ownership.

He outlined the measures that he said would make sure Help to Buy wouldn’t be a re-run of the sub-prime mortgage disaster that helped cause the financial crisis.

“Every Help to Buy mortgage is required to be taken out on a repayment basis, rather than interest-only,” he wrote.

He then compared this to the approach before the financial crisis. “At the height of the boom, many banks advanced interest-only mortgages without any record of a repayment vehicle being in place. ”

He spelled out how he thought the scheme would help people become homeowners

“For a property at the average UK price of £242,000 a Help to Buy mortgage taken out with a 5% deposit will, through repayments, have built up to a 11% equity share – even if house prices are totally flat – after three years, and a 16% equity share after five years.”

This is Money editor Simon Lambert said Help to Buy had managed to rouse Britain’s property market, writing “If you want to revive a slumbering giant you need to use unconventional tactics”.

But Lambert lamented the long-term implications of the scheme, calling it “plainly economically daft.”

“Houses are too expensive, so we solve it by lending extra cash interest-free to support high prices,” he wrote.

He said the real problem in the housing market was lack of supply and Help to Buy creates demand without supply, “thus increasing price pressure”.

Lambert said the Government would be better of with a Help to Build scheme, which would give interest-free money to builders instead of encouraging borrowing among buyers.

The chief executive of Lloyds Banking Group, Antonio Horta-Osorio, told Sky News Help to Buy was a ‘game changer’ for the UK’s economy

He refuted that it would spark a house price bubble and said it would spark a recovery in house building.

“A temporary scheme is the right thing to do as long as it is designed, as this one is, to support first-time buyers,” he said.

He praised the decision to limit the scheme to properties worth £600,000 and under, saying this would help direct it at the market outside of London “where the problems with the housing market are happening”.

 

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