Is Help to Buy a false economy?

Couple at Estate agent window The second part of the government's Help to Buy scheme for would-be homeowners was announced last week but will it turn out to be more of a hindrance than a help?

In January first-time buyers will have access to the government's mortgage guarantee that will see it back high loan-to-value home loans taken out by people who meet its strict stress-testing criteria.
This follows the first part of the scheme that has seen the government provide equity loans to those purchasing a new-build home. The equity loan bit of the scheme has already had a huge response with 7,000 people reserving homes through it.

And the mortgage guarantee is expected to have an even bigger impact considering those who are eligible can use it to guarantee their mortgages on existing homes, not just new build.

Help to Buy is doing exactly what the government wanted it to do, it's kick-starting the property market and pushing up house prices again. And every British homeowner knows that when it comes to election day, it's not tax tinkering that wins votes, it's how much the party's policies have impacted their property price.

Everyone likes to see their property price go up, especially considering we are all planning on using our homes to subsidise our pathetic pension saving, but is the Help to Buy plan working too well?
House prices in many area, not all granted, have shot up – mainly in London and the South East – and there have been predictions of a 6% rise in house prices over the next year. How does this help young people trying to get on the property ladder?

It is saddling them with larger and larger debt burdens. They are taking out huge loans just to get a foot on the property ladder but that step is tentative considering the loans they are signing their names too are based on historically low interest and mortgage rates.

What happens when interest rates rise, will these Help to Buyers find themselves needing more help to pay the mortgage?

We do need to help people on to the property ladder but is such a generous scheme needed when we have the government flooding lenders with money to keep mortgage rates down as well. In the end too many short-termist solutions without long-term solutions like increased housebuilding will surely bring this new wave of homeowners to their knees.
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