View more on these topics

Calls for Govt to water down or scrap Help to Buy

Capital Economics has called for the Help to Buy scheme to be shelved in order to cool the housing market after new data showed house prices have soared over the past year.

According to Halifax last week, house prices rose 7.7 per cent year-on-year in the three months to November.

Prices have now risen for 10 consecutive months, although at £174,910 the average house price is still 12 per cent below its August 2007 peak.

Capital Economics property economist Matthew Pointon says the scheme should be abolished but says the Bank of England is more likely to recommend scaling it back at some point next year.

Presently, borrowers can purchase homes worth up to £600,000 through the scheme but Pointon says this could well be reduced.

He says: “Help to Buy shouldn’t have been introduced in the first place, the second part certainly. I would suggest [abolishing it] as soon as possible as the best course of action for that scheme.

“In terms of what I think will happen is the Government will probably scale it back first – reducing the £600,000 limit for example. But in terms of the best course of action I think is to get rid of it altogether.”

GPS Economics director Gary Styles believes London house prices could well have increased by up to 15 per cent, although Halifax will not publish these figures until the New Year.

The Bank of England has already attempted to cool down the housing market by scrapping the Funding for Lending scheme for mortgage lending.

Styles says the government should also be looking at watering down the Help to Buy scheme to check the “unbalanced” recovery.

He says: “I would be very much in favour of scaling back the scheme. If you follow what has happened at the various Bank of England gatherings, you get the distinct impression that there is a feeling that this is the time to pull back a little. We have had the first stage of that with the FLS.

“You do sense the recovery is unbalanced. The problem is how long do you want to put up with this unbalanced recovery with the household sector borrowing too much. I think we are at the stage now where we should be considering watering down the scheme.”

Recommended

MS Leader

MS Leader: Govt stamps out hopes

Sadly it came as no surprise last week that the Chancellor George Osborne failed to tackle stamp duty land tax in his Autumn Statement. For years, brokers, lenders and the mortgage industry as a whole have watched on frustrated as one Government after another has failed to get a proper handle on the impact it […]

House-Home-Property-Ladder-Mortgage-700x450.jpg

Prices rise 4.6% year-on-year in November

House prices rose 4.6 per cent in the 12 months to November, according to the latest house price index from LSL/Acadata. The cost of the average home in England and Wales stood at £238,839 in November, up 0.6 per cent from October, when the average price stood at £237,445. Prices have risen annually by an […]

MS-11Dec-LWW.jpg

Caption Winner

Click here for this week’s Caption Competition

taxes

Out from the long grass? An IT and NI merger

Those with a long memory will recall that at the start of the last parliamentary term George Osborne announced his intention to merge income tax (IT) and national insurance (NI).  Headline grabbing as the initiative was, the reality of the complexities, challenges and costs of such a move resulted in this idea being kicked into the political long grass.

Newsletter

News and expert analysis straight to your inbox

Sign up