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Economists heap pressure on Osborne over Help to Buy

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12/05/2014
Prominent economists have added to calls for the government to pull back from the mortgage guarantee element of its Help to Buy initiative, arguing it is no longer needed.

Former Monetary Policy Committee (MPC) member Kate Barker and Citi UK economist Michael Saunders, who previously supported the scheme, say an improving economy and stable house price growth have rendered it unnecessary, according to a report in the Financial Times.

It follows suggestions from three former Chancellors – Nigel Lawson, Norman Lamont and Alistair Darling – for the scheme to be re-thought. Darling said successive governments continue “repeating the same mistakes”, particularly in the housing market.

The mortgage guarantee element of Help to Buy helps first-time buyers and home movers buy a property with a deposit of just 5% of the purchase price, up to a value of £600,000. The guarantee is provided to the mortgage lender by the government.

But there are concerns the scheme – unless scaled back – could fuel a house price boom which has already seen prices grow by almost 10% in some areas.

Former MPC member Barker, who sits on the board of housebuilder Taylor Wimpey, told the FT: “I thought [Help to Buy] was a helpful and understandable intervention for a government to make at that particular point in the mortgage market.

“But it does raise the question of when they should stop doing it.”

Michael Saunders of Citi added: “With the economy growing strongly and unemployment falling rapidly, we believe that such stimulus is no longer needed.”

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