Why help to buy won’t help most people

This week the governments help to buy scheme is launched across the UK how this will go is unclear but we can be sure this wont benefit most ordinary people. The scheme which offers would-be homebuyers interest-free loans of up to 20 per cent of the cost of a newly built property (up to a value of £600,000) and requires a deposit of just 5 per cent. Announcing Help to Buy in his recent Budget, the Chancellor George Osborne said the deposits now required for mortgages have put homeownership beyond the reach of those who can't get help from their parents. His Help to Buy solution has two parts. First is the shared equity loan where the government will lend up to 20% of the cost of a new-build property to anyone who has raised a 5% deposit themselves. The loan is interest-free for five years and can be repaid at any time, or when the buyer sells the house. With the government's 20% and your 5%, you'll get access to the more attractive mortgage rates afforded to those with a 25% deposit to put down. This kind of help was previously only available to first-time buyers with family incomes below £60,000 under the NewBuy scheme, but Help to Buy will be available to anyone who wants to buy a new home, on any income. The scheme only applies to properties worth less than £600,000, but the Chancellor says this covers more than 90% of all homes. The second part of the government's promise is its Mortgage Guarantee, which will be offered to anyone who wants to buy a home - existing or new-build - but can't afford the deposit. It will be open to all homeowners, subject to the usual checks, and the same property value limit of £600,000 will apply. So would this help people like me who are struggling to afford to move to and get my own place? Probably not as I don’t have the cash behind me to do this plus rents age still far too high in the area I live in. “Young people today haven’t got a chance of buying a house at a reasonable price, even with rock-bottom interest rates. The Nationwide Building Society data shows that the average first-time buyer in London is paying over 50 per cent of their take-home pay in mortgage payments – and that is when interest rates are close to zero.” Homeless charity Shelter and PricedOut - a campaign group for first-time buyers and owner-occupiers - however, are among those opposed to the help to buy scheme. Shelter says the money would be better spent building more homes. Chief executive Campbell Robb said: "This Budget was a huge missed opportunity to build enough homes to make sure our children will have a stable and affordable place of their own. Helping a small number of first-time buyers today will do little to meet the aspirations of young families tomorrow." PricedOut spokesperson Duncan Stott said: "Pumping more money into a housing market with chronic under-supply has one sure-fire outcome: pushing up house prices. At best it may help a small number of new buyers, but it will mean housing becomes more expensive for all those that follow." Only a mass council housing programme can start to help the housing crisis which is getting worse by the month. Coupled with a capping of rents to a fair level too will help hugely too.

Are we witnessing a housing bubble?

House prices outside London and the South East rose by 0.8% in the last year according to the Office for National Statistics in London it was even greater at 9.9% this is an incredible rate of increase and shows a lot of the housing policies this government have brought in are aiding this property bubble. UK house prices have been rising at the highest annual rate since June 2010. The rise coincides with the government's Help to buy scheme, introduced to boost the housing market. But will the scheme create a new housing bubble? UK house prices have risen by 9.9% in the year to August, according to the Halifax's latest house price survey. The government's Help to Buy scheme, which began in April, allows buyers to put down a deposit of just 5%, and take out an equity loan from the government for up to 20% of the property's value, up to a maximum home value of £600,000. It is designed to help first-time buyers get on the property ladder and enable existing homeowners to "trade up" to larger properties by giving banks greater confidence to lend. Help to buy currently only applies to new builds but from January it will be extended to cover existing homes, with mortgages being backed by a government guarantee. The scheme got off to a "flying start", according to the Home Builders Federation (HBF) in June. But Help to buy has also been criticized for having the potential to artificially raise house prices, with Business Secretary Vince Cable warning of "serious inflationary pressures". Experts give their views on whether help to buy risks creating a new housing bubble. Dr Beverley Searle, research fellow at the Centre for Housing Research, University of St Andrews Help to Buy, or any intervention which helps pay for housing, will inevitably create a housing bubble. Providing assistance with the purchase of housing artificially props prices up. We have witnessed this twice before. When it became easier to borrow money during the 1980s house prices rose. Even after the 1990s downturn the market just kept finding ways to lend people more money, allowing prices to rise again. If people cannot afford to buy a home because they cannot afford to save for a deposit, then there is something fundamentally wrong with the housing system. The government is clearly acknowledging this by providing an additional "deposit loan". For prices to stabilise there needs to be a significant increase in the supply of housing for sale and rent and the market given time to adjust. Even though Help to Buy is aimed at new build properties, it will interfere with this adjustment process. It seeks to encourage high levels of demand, with only a very limited increase in supply. The housing market has failed, it needs government intervention, but this should be in supplying housing people can afford, not letting them borrow more money for housing they cannot. Quite clearly this is adding some of the growth we are seeing now in the UK but will this last? With the UK’s rate of profit still not recovered to anywhere near what it was like before the great recession and there seems to be no will to revive the rate of profit. Housing is one way of boosting credit but I can only see this being a short term fix. The next boom is coming which will be followed by another bust. Due to the unfixed contradictions of capitalism which are always there a bigger crisis is not far away.