Budget 2013 is coming under fire for creating confusion over whether state-backed mortgages can be used by the wealthy to buy second homes. After initially being praised for introducing a raft of measures to benefit home buyers, the government is now coming under fire, with many claiming the headline grabbing Help to Buy scheme could be used by the rich.
Under the programme, homebuyers can either opt for an equity loan, in which the government lends up to 20 per cent of the value of a new build home, or a mortgage guarantee, where lenders are incentivised to make more mortgages available for people with small deposits. The GBP 130 billion scheme had been heralded as a "big new step" to stimulate the housing market and get people onto the property ladder.
However, it has now emerged that wealthy homeowners could potentially use the scheme to buy a second home costing up to GBP 600,000. Leading the charge against Help to Buy is shadow chancellor Ed Balls, who claims it is a subsidy for the rich. The Campaign to Protect Rural England (CPRE) also told the Daily Mail that the subsidy could cause house prices to rise to levels out of reach of locals in areas like Cornwall and the Lake District. "We doubt the chancellor intends the scheme to be used for second homes, but if it is legal and possible, what would stop people?" said CPRE spokesperson
The Treasury has denied that the scheme is designed to enable people to buy second homes, but claims that it may help parents to buy properties for their children. Sources stressed to the BBC that second homes will not be at the heart of the policy, but are not specifically excluded.
However, the government is yet to consult with the housing industry and details have not been entirely finalised. "The intention of the scheme is absolutely clear – it is for people who want to get their first home, or people who have a home and want to move to a bigger home because they've perhaps got a bigger family," Mr Osborne said. "If we were in a housing boom then this is not the kind of intervention you would take. But actually our housing market is not properly functioning at the moment."