Essentially, this mortgage guarantee scheme is coming under fire for being effectively too much too late. Devised in difficult times to fix a dysfunctional market, many are wondering if it is the right medicine for a strengthening market in 2014.
Under the scheme, set to launch in 2014 and run for three years, the government will guarantee up to 15% of the purchase price with the borrower putting down a deposit of between 5 and 15%.
The government is offering £12bn-worth of guarantees to lenders to fund £130bn of lending. If homes are repossessed and lenders lose more than the borrower’s deposit, they can access government guarantees.
There are, of course, prudent mechanisms in place to take the heat out of things should a boom really take off. But in its current format, commentators and policy makers are still asking if it is necessary at all – not to mention the practical problems with how to create a successful scheme that is not abused for second homes.
Like all policy initiatives, its success will be in the method of implementation. I believe there is a need for this scheme but it needs to applied judiciously – a lighter touch approach that admittedly is often beyond the of gift of government.
So just as universal benefits are rarely fair or effective, the Help to Buy scheme must provide targeted help for those that need it in regions where it will really matter.
Used sparingly and with focus it could really help those that need the help to get on the property ladder rather than raise the chances of stoking property prices as second home owners pile in for cheaper finance.
Robin Johnson is managing director of KFH Chartered Surveyors
