George Osborne announces details of Help to Buy mortgage guarantee
The chancellor George Osborne has announced the second stage of Help to Buy, the scheme which will underwrite home purchases worth up to £600,000 and will come into play in January 2014.
July 23, 2013
Osborne, who was talking to lenders and housing builders at a meeting this morning, said stringent credit and income checks as well as discounting second homes from the scheme would avoid the risk of creating a property bubble.
Homeowners Alliance CEO Paula Higgins said it was encouraging to see that the government was “finally taking the housing crisis seriously”. But she warned that the scheme was not a solution to the problem, which is ultimately caused by a housing shortage in Britain.
“This is just papering over the cracks, it does nothing to solve the long term problems in the housing market and is indeed set to make them worse.
“The Government needs to make sure that the scheme only runs for the planned three years and that there is a well thought through exit strategy,” she added.
The first stage of the scheme, which provides loans up to 20 per cent of the value of a new-build property worth up to £600,000, has had almost 7,000 signups since April.
Osborne has put a time limit of three years on the second stage of Help to Buy. Higgins said there was a worry that if it went on any longer Britain could end up with similar problems to the U.S.
“If Help to Buy goes on and on the housing market could come to rely on government guarantees – which is the situation the U.S. is desperately trying to escape from at the moment.”
The second stage of Help to Buy will see the Government guaranteeing portions of low-deposit mortgages ranging from 80-95%. This means that if the borrower defaults on the mortgage the government will cover that proportion of the lender’s loss.
By Tom Allsop