THE GOVERNMENT will back up high loan to value mortgages worth up to £500,000, it announced yesterday, as the scheme was attacked as ineffective and economically dangerous.
“The government’s NewBuy guarantee scheme, like many such schemes over the years, smacks of desperation,” said Jonathan Samuels, CEO of Dragonfly Property Finance.
“The concern is that NewBuy is intrinsically leveraged, and we know where leveraging got us in the past,” Samuels added – referring to housing market crises such as the sub-prime market in the US, which led to the global credit crunch.
The programme will help around 100,000 prospective buyers, the government said, calculating that the typical necessary deposit could be reduced from £40,000 to £10,000.
Yet NewBuy “puts taxpayers on the hook if the housing market turns sour in the future,” warned Dr Richard Wellings from the Institute of Economic Affairs. “It doesn’t solve the problem in the housing market at the moment,” he added. “Liberating planning permission would be much more helpful.”
The Council of Mortgage Lenders, however, said that NewBuy would “contribute not just to housing supply, but also to economic growth”.