Help to Buy means getting details right

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Almost two weeks on, the dust is finally starting to settle following the announcement of Chancellor George Osborne’s housing proposals in his Budget and the two-headed Help to Buy.

There is still an awful lot of detail to get straight so any welcome which is given to the scheme has to be qualified with the dreaded phrase “The devil is in the detail”.

I think what we are seeing here is a reaffirmation that this Government is happy to back the principle of home-ownership, that great British aspiration ingrained in our national psyche since the early days of Margaret Thatcher.

Also that they want to see an increase in the number of housing transactions as an important ingredient in economic recovery. Previous Government ideas have tended to be more focused on the more direct economic stimulus provided by new building. This goal is still clearly important as the expansion and transformation of FirstBuy demonstrates.

But the objective of the second limb of Help to Buy, the mortgage guarantee element, should increase the supply of low deposit mortgages. Lenders will be entering the scheme voluntarily and few have committed themselves to participation whilst so many details – including the cost of accessing the scheme – remain opaque.

Those who do should be able to make more mortgages available at LTVs between 80 and 95 per cent, allowing borrowers to get on the housing ladder earlier and spend less time saving for their deposit. Lenders should benefit from some form of capital relief – although this is not a done deal – and from putting aside less capital to cover their higher LTV loans to reflect the nature of the Government guarantee. This should appeal to funding markets, prudential regulators, and internal risk committees. But these loans will have to pass responsible lending criteria, a good defence against excessive borrowing.

There is a lot of work to do and a January 2014 start date is an ambitious target. If we get the scheme details right, then it might just be the spark for a more active housing market; provided we can avoid the Curse of the Unintended Consequence.