The flagship Conservative Help to Buy mortgage scheme will be rolled out next week – a full three months earlier than originally planned, Prime Minister David Cameron has revealed at the start of the Tory party conference.
Labour has warned that the new plans will lead to a new housing bubble, with the Government making it much easier for people to afford a deposit on homes worth up to £600,000.
The second phase of Help to Buy sees the state guarantee 15 per cent of a mortgage, meaning buyers only needs to put up 5 per cent of a property’s value.
The Shadow Chancellor Ed Balls warned of “soaring prices” which would ultimately make it harder rather than easier for first-time buyers to get on the property ladder.
But on the eve of his party conference getting underway in Manchester, Mr Cameron said that as things stand people who “don’t have rich parents” – even those with good jobs and solid prospects – are still unable to afford the most modest first homes.
The scheme will see the Government taking on the bulk of the risk of high loan-to-value mortgages, encouraging lending with state guarantees of up to £12 billion on £130 billion-worth of homes.
Speaking in an interview with the Sun on Sunday, Mr Cameron said: “I am impatient to help young people get on the housing ladder.
“The need is now. I have always wanted this to come in and frankly the earlier the better.
“What concerns me is that you can't buy a house or a flat even if you are doing okay, you have got decent job prospects and good earnings.
“I am not prepared to be a Prime Minister of a country with caps on aspiration.”
Liberal Democrat Business Secretary Vince Cable joined Mr Balls in his scepticism about Help to Buy, warning it “could inflate the market” and adding that he feared there was a “danger of getting into another housing bubble”.
Former Bank of England governor Lord King also said the scheme is “too close for comfort” to a general scheme to guarantee all mortgages.
Mr Cameron dismissed these concerns, and said people outside London “laugh, quite rightly, in your face” at the suggestion there is a housing boom.
He said: “Look at the number of first time buyers - it is still almost half what it was before the difficulties that we faced. The number of mortgage approvals is still way below where it was.
“Don't take it from me, take it from the Bank of England who looked at this last week and said there isn't one.”
Speaking to the BBC, Conservative party chairman Grant Shapps confirmed that the scheme was backed by – and would be under the control of – the Bank of England.
Mr Shapps said that it would only run for an initial three years, and that the Bank had the power to pull the plug on it at any time.
The first stage of Help to Buy was launched in April and offers loans to give people the chance to buy a new-build home with a deposit of just 5 per cent. The scheme has been credited with spurring a surge in home sales and driving up prices.