Conservative ministers have launched a robust defence of the second part of the Help to Buy scheme by claiming it is crucial to boosting home ownership and the building sector.
In his speech to the Party’s conference in Manchester today, Chancellor George Osborne dismissed critics and insisted the housing market is still struggling outside of London.
Speaking to a fringe event, planning minister Nick Boles said house builders needed the scheme to boost mortgage availability.
Help to Buy 2 has been brought forward by three months and will start next week. Lenders will be able to begin writing loans through the scheme although they will not be able to purchase the Government guarantee that underpins the loans until January, when the scheme officially launches.
It has come under heavy criticism from Labour, the International Monetary Fund and Business Secretary Vince Cable for risking steep rises in house prices and the creation of a bubble.
The Treasury has given the Bank of England extra powers to review the scheme every year as an extra safeguard against the market heating up.
But Boles said: ”The difficulty is what would they do? If you are a house builder and private sector firm then you will only build houses if there is someone who is able to get the mortgage to buy it, it’s as simple as that. They are businesses not state-owned entities so they will only build if they can sell them and won’t build if they can’t.
”Help to Buy is not bubble policy but a critical part of getting our supply side planning reforms to deliver new houses. The only alternative strategy with any intellectual coherence is to nationalise housebuilding by not expecting business to make money and organise it all from Government.”
Osborne said many critics came from the richest part of London and already own their own home.
He said: “Take your arguments to our great towns and cities where there are families who have saved for years, earning decent salaries, who can afford the mortgage repayments but can’t possibly afford the deposit being asked by the banks these days.
At a separate fringe event on housing, Home Builders Federation executive chairman Stewart Baseley rejected suggestions London could be made exempt from the scheme by claiming it was still needed in many boroughs.
He said: “Its a fair point because London is almost a country within a country. We have big regional variations in the UK but we have big variations in London too. If you go to Dagenham and Redbridge then you will not see the property bubble that is taking place in Knightsbridge and Mayfair.”