THE EXTENSION of the Help to Buy Scheme will be closed to second home buyers, the chancellor confirmed today.
George Osborne met with lenders and housebuilders at Number 11 to discuss the second stage of the scheme, which enables people to buy new homes with just a five per cent deposit.
In addition to the existing criteria set out when the scheme was first introduced four months ago, the government will now guarantee part of a home-buyer’s mortgage on properties worth up to £600,000.
Although lending and housebuilding have both been boosted by the scheme, there are concerns that it could lead to a new housing bubble, similar to the one that caused the crash in the first place.
Mervyn King, the former Governor of the Bank of England, today condemned the plans to extend the scheme, as did the Institute of Directors (IoD).
“The housing market needs help to supply, not help to buy and the extension of this scheme is very dangerous,” said Graeme Leach, chief economist at the IoD.
“Government guarantees will not increase the supply of homes, but they will drive up prices at a time when it seems likely that house prices are already over-valued.
“When the scheme is withdrawn any rise in prices that has taken place will be undermined, with potentially disastrous results. There is a real risk that the housing market will become dependent on the underwriting by government, making it very difficult politically to shut the scheme down.”