Help to Buy: The government scam of a lifetime

The new scheme  is nothing like the original Help to Buy, which was also an ill conceived scheme but not nearly so dangerous

Share
Related Topics

History repeats itself, first as tragedy, then as farce. One need not be Karl Marx to notice this happening, as we speak, under the title “Help to Buy”.

As the nation breaks down estate agents’ and mortgage lenders’ doors with pent-up demand for home ownership they cannot afford, my Cassandra warning will no doubt fall on deaf ears.  But warn I must.

When I first wrote about Phase 2 of Help to Buy being rolled out three months early, I thought it was a misguided political gimmick, foolish and amoral.

Now the details are emerging, it is clear to me that it is actually a massive scam on the British public.

What the government is doing is effectively bribing lenders – with a guarantee which protect, them, but not the buyers – to advance dangerously high 95 per cent loans, exactly like those which brought the housing market to its knees in the first place. Sub-prime, anyone?

The lenders, having effectively been given their orders to start doing this immediately for the sake of a Party political stunt with no notice, are protecting themselves with high-interest products – mostly over 5 per cent.  People with normal deposits can shop around for much better rates (under 3 per cent), hardly surprising  when the Bank of England base rate is still held at 0.5  per cent, for good reasons.

On not-so-close inspection, the expressions “Phase 2” and “rolling out” are economical with the truth. The new scheme  is nothing like the original Help to Buy, which was also an ill-conceived scheme but not nearly so dangerous. In Phase 1 the buyer was given the 20 per cent loan to top up a 5 per cent deposit to buy a newly-built property. The lenders were virtually on the sidelines, offering 75 per cent mortgages on competitive terms like they have been doing since the Credit Crunch. The main beneficiaries were, of course, the builders, but the main harm was to people struggling to sell home they neded to move out of, facing unfair competition from the new-build sector.

But Phase 2 is seriously bad, not least because it is already fuelling a market frenzy which I suspect will deliver nothing but higher prices and more frustrated buyers borrowing themselves into penury,

It well help benefit largely estate agents, who are hoping, alongside Government ministers, to see a leap in sales and therefore commissions. It may help buyers who income has rocketed so that they afford massive monthly repayments, but who can’t or won’t wait to save up for a 25% deposit.

The Treasury Select Commiittee and its ever-vigilant and independent chairman, Andrew Tyrie, has joined the chorus warning that if successful, Help to Buy Phase 2 would inflate house prices without increasing supply. I agree, but I also think we will escape economic instability, not because the genius of George Osborne will prevail but because Phase 2 will fail.

When faced with the hard facts and the even harsher figures of reality, the borrowing frenzy will abate. Left on the beach will be aspiring home buyers nursing broken dreams and renewed cynicism towards all poliiticians.

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Graphic Designer

£25000 - £35000 per annum: Recruitment Genius: A great opportunity has arisen ...

Recruitment Genius: Telesales Executive - OTE £38,000

£16000 - £38000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Parts Sales Advisor - OTE 18k-23k

£18000 - £23000 per annum: Recruitment Genius: One of Ford's leading Parts Who...

SThree: Recruitment Resourcer

£20000 - £25000 per annum + Uncapped Commission: SThree: Do you want to learn ...

Day In a Page

Read Next
 

No wonder 1,000 women a year are getting abortions because of extreme morning sickness. When I was suffering, my doctor said it would 'cure' me

Jo Crosby
 

Election catch-up: It looks more and more as if we should get used to Prime Minister Miliband

John Rentoul
Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders