War Of Words Over Budget`s Mortgages For All Scheme

Date Published 25 March 2013

The ministers responsible for housing, Eric Pickles and Mark Prisk, have spoken of their support for the Help to Buy scheme – as criticism of the idea was mounting. Labour said it was a millionaire`s charter to buy second homes at the taxpayers` expense and think tank Fathom said the initiative would cause the worst outcome – a new housing bubble.

In the Commons, Chancellor George Osborne could not, or would not, answer three questions from his Shadow counterpart Ed Balls.

Would the scheme be available to people buying second homes? Would it be available to people with incomes of more than £100,000 a year? Would the scheme be available to buy-to-let landlords?

Balls said it was a matter of either `yes/no, yes/no, yes/no`. But a discomfited Osborne made no response.

Although Help to Buy will not be available for buy-to-let purchasers, it seems that other types of landlords could use it. At least one business was by yesterday advising that landlords could use the scheme to get a 95% mortgage on a short-lettings property.

Arnaud Bertrand, of HouseTrip, said: `Investors may want to examine the Help to Buy scheme as an option if they are looking to purchase a holiday home and secure a good return on investment. Short-term letting secures more income for a property owner than renting out long term, so the fact that a buy-to-let option is not permissible should not prevent anyone from considering this opportunity.`

The Help to Buy scheme unveiled in the Budget has two parts. Firstly, a shared equity scheme for all buyers of new-build homes worth up to £600,000, starting next month. And a mortgage indemnity scheme available to buyers of both new and pre-owned homes starting next January, which will allow them to buy a property with a 95% mortgage.

Communities secretary Eric Pickles welcomed the new housing package.

He said: `This support is not just an economic calculation – it’s about values.??`These measures mean whoever you are – whether a prospective first-time buyer, an existing home owner or a social tenant – if you work hard and want to take responsibility for your future, we will support your aspiration to move up the property ladder.`

Housing minister Mark Prisk said: `The Budget places housing front and centre in the Government’s plans for economic growth, with measures aimed at getting Britain building, helping aspiring home owners, and supporting our growing market for privately rented homes.

`The clear message from the multi-billion pound package of measures is clear: that wherever you are in the housing market, whether renting council housing or privately, whether a first-time buyer or looking to move up the property ladder, there is help available for you.`

The £3.5bn Help to Buy: Equity Loan scheme is intended to help up to 74,000 buyers of new homes only, with just a 5% deposit. It will replace the FirstBuy scheme, which is currently limited to first-time buyers.

Under the scheme, buyers of new homes will be eligible to receive a 20% equity loan to purchase properties from a participating developer.

The second option, called Help to Buy: Mortgage Guarantee, will enable lenders to use Government-backed guarantees to offer £130bn worth of mortgages with smaller deposits, as little as 5%, on both new and existing properties.

Taxpayers will provide security for this loan, so if a property bought under the scheme is then repossessed and sold for less than the outstanding mortgage, the lender will be able to recover its loss.

If the scheme works in the same way as the current NewBuy scheme, the indemnity will be purely there for the lender, acting as an incentive to stump up a 95% mortgage. There will be no guarantee that the purchaser will not fall into negative equity.