Monday, 12 March 2012

It's the price isn't it?

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In a fit of populist fervour the government is proposing a scheme to help first time buyers get on the housing ladder:

David Cameron will today formally open the NewBuy Guarantee scheme, where the Government guarantees part of a homebuyer’s mortgage, allowing them to take out much larger loans than they might otherwise be eligible for.
The guarantee will allow people buying new-build properties to borrow up to 95 per cent of the value of their new home. 

Two quick observations here - firstly wasn't giving housing loans to people who can't afford them the biggest reason for the current financial train crash? And if so why on earth are we repeating this mistake?

And secondly, isn't the big problem price rather than access to finance? House values have (as the fortunate owners know) risen considerably faster than general wages for several decades - barring the occasional and inevitable price crash. This means that fewer people can afford to buy those houses.

So this scheme isn't about helping people who want to buy houses at all. It's actually about helping people who want to sell houses. The best way to help buyers is to build more houses in places (like the South East) where there is work and where people want to live. But I guess there's no votes in that, is there?

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1 comment:

BatleyGreen said...

It is not that they are priced out of the market. Me and my wife bought our property 6 years ago and seen the price of that house rise by around 30% and then plummet to below its original purchase price leaving us in a negative equity position. We need to move we are a family of 4 in a teo bed house and we simply need more space. The current price of our own home however means that we simply cannot. No government scheme will help us.