The three leading grassroots groups in the Liberal Democrats have come together in a rare joint initiative to condemn the Conservatives‘ plans to accelerate the Help to Buy scheme providing government guarantees for 95% mortgages.
The scheme had been due to start in January, but the Conservatives rushed it forward to the next few days and have won the backing of the major banks even though details of the fees the government will charge mortgage brokers for guarantees are yet to be published.
Critics claim the £12bn mortgage scheme may fuel a house price boom, and the business secretary, Vince Cable, has criticised the scheme, calling at a minimum for the scheme not to be implemented in London and the south-east.
Senior Liberal Democrats were not consulted over the acceleration of the scheme by the chancellor, George Osborne, and some regard it as a politically driven effort to create a feelgood factor before the election with rising house prices.
In a joint letter, the chairs of Liberal Reform, Social Liberal Forum and Liberal Left warn that the “UK housing market is to all intents broken, with chronic shortages of supply having combined with an out-of-control financial system to create a house price bubble which (outside of London at least) deflated but never burst.”
They continue: “It is clear to us that the solutions to the housing crisis, and to an extent to the UK’s wider economic problems, are to be found in supply-side measures, not in simply creating further demand.
“So while we supported the first part of the Help to Buy scheme, which focused on new-build properties, we fear that the new element may simply lead to another house price bubble. As Nick Clegg said in June, ‘it would be real folly to simply go for easy wins on boosting supply of mortgages that doesn’t lead to supply of new housing’. Vince Cable has warned of ‘the danger of getting into another housing bubble’ and recent price rises vindicate this.”
Liberal Reform is broadly pro-market while Social Liberal Forum has a more social democratic element in its ideology. Together they cover the political spectrum in the party.
They welcome the Bank of England being given oversight of the scheme, but urge the government to do more to prevent a house price bubble.
Osborne, speaking on BBC News, said: “90% mortgages are the way many people in this country bought their homes. They are not weapons of financial destruction; they are a way of helping people on to the housing ladder. People will have to be able to afford the mortgage repayments, but that does not mean that people should be asked for very large deposits of the kinds they are being asked for at the moment. That is a problem with the banks, not a problem with the housing market.”
He argued: “Boosting access to mortgages would boost supply. I am all for more homes built in our society. I think this is a really big issue facing our society. Is this generation that have got homes prepared to say to the next generation: ‘You know what, you are never going to be able to afford a home’? I think that would be a very, very bad step for our society.”