DAVID Cameron yesterday announced that a controversial scheme offering taxpayer-subsidised mortgages will launch this week, without consulting his coalition partners and despite mounting criticism that he is stoking a new housing bubble.
The second part of Help to Buy, which will enable buyers to purchase a house with a deposit of just five per cent, was due to begin in January.
But, in a surprise announcement at his party’s annual conference in Manchester, the Prime Minister said the state-backed RBS, Lloyds and Halifax banks would instead offer such mortgages “within days”.
City A.M. understands that the decision to bring forward the policy was made solely by the Conservatives, with Liberal Democrats such as business secretary Vince Cable only finding out when Cameron told broadcasters of his decision.
Cable has been a vocal critic of the policy, which will be available on any house worth up to £600,000, and feels it should not apply in the capital. Earlier this week the government responded to criticisms by handing oversight of the policy to the Bank of England’s Financial Policy Committee.
Meanwhile, new data released today from a leading property group shows that – even before the Help to Buy extension comes into effect – house prices have already had their strongest monthly price increase for six years.
Property analysts Hometrack said September saw the largest house price increases recorded since May 2007, before the financial crisis.
The company found prices in England and Wales rose by 0.5 per cent in September alone, while 41 per cent of postcodes have seen prices rise over the past 12 months, and only six per cent have seen declines.
In London, the situation is more extreme: prices have surged by nearly 10 per cent in the last 12 months as the supply of properties coming up for sale has dipped by 2.9 per cent.
Campaign group PricedOut said Help to Buy would not help young people: “Guaranteeing mortgages can only cause more money to be lent into the housing market, meaning house prices pushed even further out of reach of first-time buyers.”