George Osborne's flagship Help to Buy housing scheme is dangerous and risks "detonating a bomb under the British economy", David Cameron's new housing advisor has said.
George Osborne’s flagship Help to Buy housing scheme is dangerous and risks “detonating a bomb under the British economy”, David Cameron’s new housing advisor has said.
According to today’s Times, Alex Morton, who joins the Number 10 team next week, has expressed strong misgivings about the Chancellor’s Help to Buy scheme, which provides loans to prospective homeowners worth up to £600,000.
As the Times (£) reports:
‘Mr Morton, who was poached by Downing Street from the centre-right Policy Exchange think-tank, has warned that Help to Buy is likely to lead to “boom and bust”. He also compared the scheme to a US government attempt to bolster the housing market that ended in “complete disaster”.
‘Writing about the controversial scheme in the summer, he said it risked “creating a mini property bubble that will then collapse in early-2017 as the funding is withdrawn”. He said it may dent the political recovery enjoyed by the Chancellor since the disastrous 2012 Budget, which appeared to have damaged his chances of becoming Tory leader. Mr Morton added that the scheme should be “heavily revised”.’
Help to Buy was first announced in April, and in July George Osborne promised stricter testing of those who can afford mortgages as well as a ban on second home purchases through the scheme.
Help to Buy has been strongly criticised by a number of experts since it was introduced by the chancellor to help first time buyers get on the housing ladder. The Institute of Directors described the scheme as “very dangerous”, and former United States secretary of the treasury Larry Summers said it “goes against basic things taught in economics textbooks”.
In June, Albert Edwards of French bank Societe Generale also called the policy “truly moronic”, and said it stood “head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business”.
4 Responses to “Help to Buy risks ‘detonating a bomb under the British economy’, says Cameron housing advisor”
Timmy2much
The real reason help to buy was introduced was to raise the cost of houses again – not to get people on the housing ladder directly.
This needed to happen to take people out of negative equity which was a risk to the banks (and by extension the entire economy) as well as to millions of individual property owners who risked being made bankrupt by having a house they could no longer afford to pay for, but also couldnt sell at the price they needed to pay off the mortgage – or even close to it. There is also the added bonus of getting house builders building again which employs millions of low paid workers – those very same people most affected by the recession.
It was basically a very clever ploy to stabilise the economy – thus far it has worked and it has bought time for other sectors to recover.
The skill will be in how it is removed.
sarntcrip
IT GAVE WEALTHY TORIES ACCESS TO YET MORE MONEY
brit1664
How can re-inflating the housing bubble be a good thing? All it is doing trapping another generation into negative equity and fueling the next economic collapse.
What we need is a return to the free market and an end to stimulus so house prices can find their natural level and our economy can grow sustainably.
Timmy2much
The next generation wont be trapped because they probably wont be home owners (not something I think is a good thing, just the reality of the situation).
A housing bubble is not a good thing, as you point out, and what is needed is for a period of stagnation to occur once houses are close to where they were at the time of the crash so as to bring things back in to line. ( This could come in the form of house price increases being way below inflation). The reason to get prices back up I’ve already covered and these short term reasons outweigh the long term issues that it creates – on this occasion.
The problem we have though is the increasing number of people in the country will keep pushing house prices up and there will be little any government can do other than getting the BoE to hike inflation rates – but that wont work due to foreign money buying properties and inflation damaging our export market massively (resulting in job losses).
EVERYONE needs to be concerned about the number of people coming to this country – it is the ONE issue that if resolved will help almost every issue going;
House prices
Low wages
Unemployment
Overcrowded infrastructure
Lack of school places
NHS failing (pick a specific reason – it all links back to overuse)
Crime
Massive welfare bill (dont believe the gumf about immigrants being net contributors as all they are doing is using 1 millionaire to justify the presence of 30,000+ ‘burdens’ which is unfair as more millionaires set themselves and their accounts in the financial capital of the world – London! – and it skews the results as these people are not your average immigrant that people have concerns about and they probably wont settle here permanently anyway).