Help to Buy Part 2 – the one where government guarantees mortgages to borrowers with a 5% deposit has attracted huge controversy, with experts going so far as to brand the policy “very dangerous“. It’s too early to say whether it will, as some fear, lead to another housing bubble that the Bank of England may have to burst before it’s too late. But in the meantime, new figures revealed yesterday show the performance of Help to Buy 2’s less controversial older siblings, “NewBuy Guarantee Scheme” and “Help to Buy: Equity Loan Scheme”, which provide government support for purchasers of new-build homes. Catchy titles.
The housing affordability problem is fundamentally driven by a lack of supply. As in all markets, when demand increases, but supply is constrained, prices tend to go up. And so the precursors of Help to Buy Part 2 seem, in contrast, relatively benign. Government uses funds to help people get on the housing ladder, but the funds are linked to the building of a new home. Supply increases with demand, limiting the risk of a housing bubble.
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