Early signs not good for British help-to-buy scheme

Fears that scheme designed to help first-time buyers may actually push up property prices

Chancellor George Osborne: some commentators accused him of creating a government-backed sub-prime mortgage sector. Photograph: Chris Harris/The Times/PA Wire

Chancellor George Osborne: some commentators accused him of creating a government-backed sub-prime mortgage sector. Photograph: Chris Harris/The Times/PA Wire

 

A nurse and a former Queen’s Guard have become the first couple to take up the government’s help-to-buy scheme, unveiled with much fanfare by chancellor George Osborne in his March budget and launched last month with the aim of helping first-time buyers on to the housing ladder.

The couple, Catherine McClean and Nikolai Ivanovic, both in their 20s, are now the proud owners of a three-bedroom Taylor Wimpey property near Liverpool, although it seems things may have moved a little fast for them – McClean admitted they’d be sleeping on blankets for the first few days as they had no furniture.

There’s an even more uncomfortable outcome awaiting the government, according to economists at Fathom Consulting, who are warning that the “reckless” initiative will push average house prices up to as much as £300,000.

Osborne had barely resumed his seat in the Commons after delivering his budget before economists started to pick holes . Some accused him of creating a government-backed sub-prime mortgage sector .

It soon emerged that the scheme – which offers interest-free loans worth up to 20 per cent of the cost of a newly built property, up to a value of £600,000, and requires deposits of just 5 per cent – would also be available to those buying second homes; not what the government had in mind.

And the Office for Budget Responsibility, the government-appointed forecasting body, sounded an early note of caution on the initiative, saying it could serve to drive house prices higher, making it even harder for first-time buyers to get on the property ladder.

The first detailed research on how the scheme might affect the market as a whole is starting to come through. It makes alarming reading – the team at Fathom, who are former Bank of England economists, are warning that it could push prices up as much as 30 per cent by 2015, taking the average house price from £233,000 currently to £300,000.

That i s a housing bubble and it’s the last thing the battered British economy needs. Fathom economist Andrew Brigden is scathing in his summary : “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.”

The government is, he said, using public money to incentivise banks to lend to those individuals who would not and should not be offered credit.

There could be other unintended consequences . It makes the government an active player in the mortgage market, and, as such, higher house prices will be in the treasury’s interest as a way of limiting losses to the taxpayer.


Typical CEO
Aged 53, male and with a background in accountancy or financial management – that’s the typical profile of a Ftse 100 chief executive these days, according to recruitment specialist Robert Half.

Its annual Ftse 100 chief executive tracker survey shows that more than half the heads of Britain’s leading 100 companies have a background in finance, a figure that has risen sharply since the financial crisis struck in 2008, when it was less than a third. The trend is likely to continue, says Robert Half’s Phil Sheridan, as the current risk and regulation agenda drives demand for number-crunching skills.

The survey shows some moves towards greater diversity in the boardroom – for example, the number of chief executives from Oxford or Cambridge has tumbled by 29 per cent, to 15. But the figures on women in top roles make for depressing reading, with the proportion of women directors slipping from 17.4 per cent to 17.3 per cent over the year despite the government drive to increase female representation in the boardroom. It has a target figure of 25 per cent for Ftse 100 companies by 2015, and business secretary Vince Cable has warned companies that quotas may be imposed if this target is not met.

At the very top, there are just three female chief executives in the Ftse – Angela Ahrendts of Burberry, Alison Cooper of Imperial Tobacco and Carolyn McCall of easyJet. Had the budget airline not been elevated to the Ftse recently, there would have been just two.


Fiona Walsh writes for the Guardian in London

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