‘Help to Buy’ will inflate a bubble

The second phase of the government's Help to Buy' (HTB) scheme was launched this week. As of January 2014, the government will offer £12bn of mortgage guarantees to spur lenders to offer housing loans to people with low deposits. It believes it can thus support £130bn of mortgages where a deposit of as little as 5% is needed. This scheme is available for both newbuild and existing houses. The other option under HTB, available since April, is a government interest-free loan worth 20% of the property's value, designed to top up a 5% deposit. This only applies to newbuilds.

What the commentators said

This is in effect a "£130bn bung from taxpayers to housebuilders and estate agents", said The Guardian. It will do very little to address the fact that far too few houses are being built in Britain. That requires steps such as "shredding regulation" in the planning system or spurring the state to invest in public housing.

In the meantime, the government is artificially inflating demand, said Allister Heath in The Daily Telegraph. "It's extraordinarily reckless", as Heath pointed out, because it reflates the housing bubble from a point where houses are still historically expensive. The policy stokes the feel-good factor and is thus politically astute. But it will make the "inevitable day of reckoning" for the housing market "even more traumatic".

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