Urging more detail on a number of issues, the 128-page Budget report, issued at the end of April by the cross-party parliamentary committee, called the government’s Help to Buy scheme a “work in progress” that could have a number of unintended consequences.
Urging more detail on some issues, the 128-page Budget report, issued at the end of April by the cross-party parliamentary committee, called the government’s Help to Buy scheme a “work in progress” that could have unintended consequences.
In assessing George Osborne’s Budget, committee chairman Andrew Tyrie MP said it is not possible to estimate the scheme’s effects without further detail.
He claimed that as a consequence of its involvement in the mortgage market, a reduced level of forbearance by lenders could increase repossessions and expose the Treasury and the taxpayer to large losses on guaranteed mortgages.
The paper added that the scheme may not be in the interest of first-time buyers because it could increase prices due to the continuing lack of housing stock, and that the chancellor’s assertion that the scheme would trigger an increase in housing supply was “unconvincing”.
Concerns were also raised about the duration of the scheme. The committee said: “Should the scarcity of high loan-to-value mortgages reflect structural rather than cyclical factors, the pressure for the government to extend the scheme in three years time will be immense.
“The unintended and unwelcome outcome could be that a scheme designed to deal with a supposed temporary problem in the UK housing market becomes a permanent feature.”
The government’s lack of clarity on whether people looking to buy a second home would be eligible for the mortgage guarantee scheme was also raised.
Areas the committee criticised included:
- The lack of an estimate of the home owners the government expected to support through the guarantee scheme.
- No estimate of the effect the guarantee and Help to Buy schemes would have on the mortgage market.
- The size of the supply response expected.
- How the government will determine the commercial fee from lenders who participate in the scheme.
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ADVISER VIEW
Jane King, principal of London-based Ash-Ridge Asset Management, said: “Not enough thought has been put into these proposals. Without an increase in house building, all the mortgage guarantee scheme will do is drive prices up. I’ve spoken to people who can afford to buy that are waiting to take advantage of the scheme to buy larger houses.”
