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Is the Help to Buy Scheme Really What it Seems?

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real estate  United Kingdom  Bank of England  Fathom Consulting  Help to Buy  Andrew Brigden  IPIN Global 

Is the Help to Buy Scheme Really What it Seems?

By - Friday 10 May 2013

While the government was praised for its introduction of the Help to Buy scheme, a report has suggested that it may not be what it seems. Former economists at the Bank of England claim it could end up raising the cost of the average home to GBP 300,000 because of the price of inflation. Calling the programme "reckless", the experts at Fathom Consulting, explain in their 'Can “Help-to-Buy” re-ignite the UK housing market bubble?' report that prices could increase by a massive 30 per cent by 2015.

Help to Buy was designed to get first-time buyers onto the property ladder and is a mortgage guarantee that enables people to get a new build home or existing property with a deposit of only five per cent. Set to commence on January 1st 2014, it is available to first-time buyers and home movers. However, those intending to rent out the property won't be able to benefit from the scheme.

Despite being initially hailed as a way to reinvigorate the housing market, experts now claim it will prove counterproductive. They explained that the fact only a handful of people can afford to buy real estate is keeping average house prices contained. Values currently stand at GBP 233,000 and are already proving too great for budding buyers.

Andrew Brigden, senior economist at Fathom Consulting, said: "Help to Buy is a reckless scheme that uses public money to incentivise the banks to lend precisely to those individuals who would not and should not be offered credit. Had we been asked to design a policy that would guarantee maximum damage to the UK’s long-term growth prospects and its fragile credit rating, this would be it."

Fathom Consulting believes that Help to Buy is at risk of re-igniting the housing market bubble, which would mean the collapse of the property sector once again. This is partly because the scheme hasn't been properly contained - it is essentially open season for buyers. The government has been heavily criticised over the potential use of Help to Buy to fund second homes.

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