Tory MP Dr Kwasi Kwarteng has criticised measures to stimulate the housing market announced in yesterday’s Budget, warning that the government’s Help to Buy scheme “risks asset price inflations”.
(Check out this handy infographic of how the Help to Buy scheme works.)
The MP for Spelthorne said he had “doubts” about “the government essentially entering into the mortage market” at a breakfast briefing on Thursday morning.
He added: “My only worry with this is having a system in which you are giving mortgages without actually increasing the supply will lead to asset price inflations.
“Because obviously if the amount of supply stays the same and you’re making credit easier, as it were, by guaranteeing mortgages, the tendencies would be – as you’d expect – for the prices to go up.
“So I think with that we possibly could have announced something bolder on the supply side to increase the supply.”
Kwarteng added that Osborne “came up with a solution” to the “social problem” of our housing shortage, “but there is debate about the efficacy of the solution”.
Matthew Sinclair, CEO of the TaxPayers’ Alliance, also criticised the Help to Buy scheme at the same briefing, calling it a “very dangerous way to go about things”.
George Osborne, predictably, defended the scheme on BBC Radio 4’s Today Programme on Thursday morning. “The mortgage market is an extremely complex thing,” he said. “The intention of the scheme is absolutely clear – it is for people who want to get their first home or have a home and want to move to a bigger home because perhaps they have got a bigger family.
“We are working with the industry to get a scheme that works.”
The property and construction industries, as you might expect, have come out in favour of the government’s moves to stimulate the housing market.
Lucian Cook of Savills research said: ““We believe that the Help to Buy initiatives will have a much bigger impact on the functionality of the market and transaction levels than previous Government schemes such as FirstBuy and NewBuy.
“We also expect the schemes announced to give a bigger boost to house building, although we still forecast levels of construction well below the 230,000 new homes needed a year.
“Savills research estimates that the £3.5 billion Equity Loan scheme has the capacity to support 75,000 new homes sales over the next three years – the equivalent of 25,000 more sales a year.
“Whilst that would only increase transaction levels across the whole of the housing market by around 2.5%, it is likely to have a much bigger impact in the first time buyer and second stepper markets which have been most affected since the credit crunch.”
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