George Osborne's Help to Buy mortgage subsidy makes it easier for first-time buyers to borrow. "That's great," you might say. "Now more people can get on the housing ladder." But what effect does this policy have on house prices? And what does it mean for everyone who can't claim the subsidy?
New data shows London's house prices are higher than ever . Prices are rising much faster than wages, making homes less and less affordable. Why? Because the Chancellor has made it easier for a chosen few to get a mortgage.
Osborne's mortgage subsidy increases the reservoir of buyers. Because more people can borrow money, more people are in the market for a house. But the mortgage subsidy doesn't increase the housing stock by one brick. More people are bidding for the same number of houses. That means house prices go up.
If you're a first-time buyer, you might be okay. The mortgage subsidy means you can buy a house – even if you have to borrow a fortune. But what about everyone else? People who can't claim the subsidy are now finding a new house out of reach. So instead of expanding home ownership, the Chancellor has restricted affordability to those who can get easy credit. Because he has picked a tiny pool of winners, everyone else loses out.
But can Osborne see the damage he's doing? Not remotely. In fact, next year he'll be rolling out a new London Help to Buy. While all in favour of helping people in London buy, this approach will actually mean even fewer affordable houses overall.
More affordable housing requires more houses and less cheap credit.
Printed by Douglas Carswell of 61 Station Road, Clacton-on-Sea, Essex