This week the government launched the second part of the Help to
Buy mortgage guarantee scheme – the means by which the state will
guarantee 15% of the deposit on a mortgage.
The government claims this will help people who can't save for a deposit to get onto the housing ladder. Critics – everyone else from financiers to economists to housing specialists – claim it will create a new and unsustainable housing bubble; subprime lending that was the cause of the banking collapse.
For someone struggling to save, a reduced deposit is an easier route to home ownership.
But this has to be about more than one mortgage. It has to consider the cumulative impact and the colossal risks that brings to government finances should it all go wrong.
But the aspect of the policy I find particularly interesting is the huge and conflicting disparities between the housing markets in and around London, and much of the north of England; in particular in very low demand areas such as my constituency, Accrington. A quick glance at current average house prices on Prime Location shows a gigantic disparity between London (average price £491,000 – predicted to rise to £500,000 by the end of the year) and Lancashire (£141,000 to £157,000, depending exactly where).
The policy therefore runs the risk of pumping far more money into already super-heated housing markets in London simply by virtue of the cost of properties there. The policy has no mechanism to ensure a geographical allocation of the guarantees – there is nothing to prevent the majority of the £12bn being spent on fewer, more expensive mortgages.
Even in Lancashire this high bracket has seemingly perverse consequences – the £600,000 upper limit could purchase a very large property indeed. It is possible to buy five-bedroom properties with significant land with room for stables and horses. Should the hard-pressed taxpayer support the wealthy of Lancashire?
As the Guardian itself warned this week, City bankers were holding off buying a property and getting 95% mortgages instead in order to free up cash that would otherwise be locked into a property through the deposit. I do not think city bankers and those hoping to bump themselves up the ladder (up to a potential £600,000 house!) are particularly the people that we ought to be focusing on when it comes to housing aspiration – and it certainly wasn't the way the policy was sold to the public. My hard-pressed constituents are paying into a pool of money which could be being used to guarantee the mortgage of someone who gets very highly paid so they can buy a £600,000 house.
The reason we have low demand in East Lancashire is in part due to the economy, but that in turn is partly due to the housing market: we have an oversupply of houses that people don't want to live in (many of which as a result stand empty, boarded up). If the government wanted to improve the housing prospects of first-time buyers they would focus on building new houses across the country. £12bn to prop up mortgages could be spent to massively open up supply and build hundreds of thousands of new dwellings.
I hope this policy works for the people who take part in it, and anything that helps (or could help, as long as the budget isn't swallowed up on a smaller number of expensive properties) young people should be welcomed – however it is a short-term solution to the problem of undersupply of housing in parts of the country, and undersupply of quality properties in others.
My constituents' tax is being used to guarantee these mortgages – they ought to benefit from it (I hope the Treasury is at least monitoring where the money is going, though I am not optimistic). There are better policies the government could have pursued, but this is the one they chose – the least they could do is guarantee my constituents have an equal opportunity to take part.
• Graham Jones is the Labour MP for Haslingden and Hyndburn
Article Source: http://www.theguardian.com/uk-news/the-northerner/2013/oct/10/help-to-buy-scheme-north-safeguards
The government claims this will help people who can't save for a deposit to get onto the housing ladder. Critics – everyone else from financiers to economists to housing specialists – claim it will create a new and unsustainable housing bubble; subprime lending that was the cause of the banking collapse.
For someone struggling to save, a reduced deposit is an easier route to home ownership.
But this has to be about more than one mortgage. It has to consider the cumulative impact and the colossal risks that brings to government finances should it all go wrong.
But the aspect of the policy I find particularly interesting is the huge and conflicting disparities between the housing markets in and around London, and much of the north of England; in particular in very low demand areas such as my constituency, Accrington. A quick glance at current average house prices on Prime Location shows a gigantic disparity between London (average price £491,000 – predicted to rise to £500,000 by the end of the year) and Lancashire (£141,000 to £157,000, depending exactly where).
The policy therefore runs the risk of pumping far more money into already super-heated housing markets in London simply by virtue of the cost of properties there. The policy has no mechanism to ensure a geographical allocation of the guarantees – there is nothing to prevent the majority of the £12bn being spent on fewer, more expensive mortgages.
Even in Lancashire this high bracket has seemingly perverse consequences – the £600,000 upper limit could purchase a very large property indeed. It is possible to buy five-bedroom properties with significant land with room for stables and horses. Should the hard-pressed taxpayer support the wealthy of Lancashire?
As the Guardian itself warned this week, City bankers were holding off buying a property and getting 95% mortgages instead in order to free up cash that would otherwise be locked into a property through the deposit. I do not think city bankers and those hoping to bump themselves up the ladder (up to a potential £600,000 house!) are particularly the people that we ought to be focusing on when it comes to housing aspiration – and it certainly wasn't the way the policy was sold to the public. My hard-pressed constituents are paying into a pool of money which could be being used to guarantee the mortgage of someone who gets very highly paid so they can buy a £600,000 house.
The reason we have low demand in East Lancashire is in part due to the economy, but that in turn is partly due to the housing market: we have an oversupply of houses that people don't want to live in (many of which as a result stand empty, boarded up). If the government wanted to improve the housing prospects of first-time buyers they would focus on building new houses across the country. £12bn to prop up mortgages could be spent to massively open up supply and build hundreds of thousands of new dwellings.
I hope this policy works for the people who take part in it, and anything that helps (or could help, as long as the budget isn't swallowed up on a smaller number of expensive properties) young people should be welcomed – however it is a short-term solution to the problem of undersupply of housing in parts of the country, and undersupply of quality properties in others.
My constituents' tax is being used to guarantee these mortgages – they ought to benefit from it (I hope the Treasury is at least monitoring where the money is going, though I am not optimistic). There are better policies the government could have pursued, but this is the one they chose – the least they could do is guarantee my constituents have an equal opportunity to take part.
• Graham Jones is the Labour MP for Haslingden and Hyndburn
Article Source: http://www.theguardian.com/uk-news/the-northerner/2013/oct/10/help-to-buy-scheme-north-safeguards
