The second part of the government’s new “Help to Buy” scheme has been launched, three months earlier than planned.
For houses up to a value of £600,000 the government will offer a new buyer a loan worth 20% of the value if the buyer puts up a 5% deposit.
The government claims that the scheme will help more people buy property.
Natwest, RBS, and Halifax have said theywill offer mortgage loans for the remaining 75%.
Buyers won’t be charged any interest on the government loan for the first five years, but from the sixth year, will be charged a fee of 1.75% of the loan’s value, which will increase every year in line with inflation plus 1%, for up to 25 years or when the house is sold.
Housing charity Shelter warned that “if you take out a mortgage backed by a government guarantee and are repossessed, you will still have to pay back any money you owe the bank.”
The government has pledged loans worth up to £12 billion, for £130 billion of mortgages. This is equivalent to about 18% of the UK’s GDP, or the NHS’s entire annual budget. The average house now costs £164,654 — an increase of 1.3% since last year. House prices in London leapt 10% in just a month to October 2013, with the average price in the capital at over £500,000.
Most first-time buyers will struggle to find the 5% deposit necessary to get onto the “Help to Buy” scheme. This, and the fact that the maximum house price that the government will give a help to buy loan to is £600,000 (well over the average price of a house), suggests the scheme may mostly help inner-city property speculators looking to buy up.
The scheme does nothing to ease the housing shortage. All it will do is speed a rise in house prices, by boosting demand where supply is inflexible. Some may gain. More will lose out because house prices and rents will spiral even further out of reach.
In London alone there are 380,000 households on local authority waiting lists for social housing.
Nearly 41,000 households with children were still in temporary accommodation at the end of 2012, waiting for social housing. There were 10,206 mortgage and landlord possession orders in the first quarter of 2013 (courts orders evicting people for not paying their mortgage or rent).
Only 500 new council houses are expected to be completed by the end of 2013. In contrast, 1,000 council houses have been sold through the “Right to Buy” scheme this year.
There are an estimated 800,000 vacant houses and 1.5 million empty sites in Britain. The labour movement must fight for a mass building project of affordable council housing.
We should demand rent caps on private housing, and an interest cap on mortgages, with increasing rates of housing benefit and local housing allowance that meet the rising cost of living.
Vacant houses used for property speculation should be seized and used to re-house people, and we should fight militantly against the use of the “Right to Buy” and “Help to Buy” schemes to give a housing subsidy to the better-off.
We need to resist evictions for mortgage or rent arrears, particularly as the bedroom tax hits.