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Osborne denies Govt MIG will create new housing boom

George Osborne
George Osborne: Govt schemes will create 190,000 mortgages

Chancellor George Osborne today denied accusations that his new mortgage indemnity scheme will simply inflate house prices and fuel another boom.

Speaking to the Treasury select committee on the Budget, Osborne said the aim of the MIG is to boost housebuilding and make it easier for people to buy or move home.

At the Budget last week, Osborne unveiled a shared equity scheme and a mortgage indemnity guarantee scheme, both branded as Help to Buy. He predicted the combined impact would be an extra 190,000 mortgages a year.

Under the MIG, set to launch in 2014 for three years, the Government will offer a guarantee of up to 15 per cent of the purchase price, with the borrower putting down a deposit of between 5 and 15 per cent.

At the TSC hearing today, chair Andrew Tyrie asked Osborne: “Are you not concerned we are ploughing money into the boom and bust housing system?”

TSC member Andy Love said: “There is more than a little concern that the effect of the scheme will just push up house prices, how do you respond?”

Earlier today the Office of Budget Responsibility told MPs it expects the immediate effect of the MIG will push up house prices. But Osborne rejected suggestions that the scheme is likely to inflate house prices or create a bubble.

He said: “It is a temporary, time-limited intervention in the housing market that addresses a market failure.

“In normal times you would not undertake an intervention like this but the number of first-time buyers has halved, the price of deposits have trebled and housebuilding is nothing like the rate we would want in normal times. It is perfectly appropriate in these circumstances to intervene but we have to be clear that you can turn off the tap.”

Osborne also said he has given the financial policy committee a “lock” to shut down the scheme and he does not expect it to last more than three years.

He also repeated claims that the “clear intention” of the MIG is to help people buy or move home but refused to rule out people buying second homes, indicating he wants to avoid complexity. He highlighted cases where someone moving home, such as a divorcee, may have two mortgages and he does not want to exclude them.


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Honest Guv, I just need a quick bottle of vodka / meths to get me over this rough patch, then I’ll dry out
    Promise I will
    Honest guv,
    you can trust me, I used to be a top blolke in politics

  2. Everyone everywhere 26th March 2013 at 5:17 pm

    Anything that helps break the deadlock on property and allows people onto the ladder has to be a good thing.

    Just need the regulators to understand this and free up mortgagees capital reserves relevant to the portions the government is now underwriting.

  3. What the chancellor seems to miss is that the reason that people are unable to get onto the property ladder is that prices remain too high.

    The US property market is well into recovery as a result of their deep correction making it attractive again. Unfortunately this government’s economic policies are dependent on a booming property market and the risk of falling prices at a time where an inflationary bubble is being created is a sure-fire vote loser.

    Guaranteeing loans which buyers are unlikely to be able to afford once interest rates begin to rise is a recipe for disaster.

  4. The Chancellor wants a house price boom, hopefully timed to coincide with the next election. If the ‘Osborne boom’ is going to be built on sub-prime loans that we the taxpayers have to underwrite, then so be it.

    The subsequent slump and repossesions don’t concern him at all – everything he does and says is purely targeted at the next election.

  5. Re Smithy. At no point is this a Sub Prime scheme.
    As a way of getting movement in the housing market it is a limited scheme and if this helps kick start house building and allows folks to move (2 housing transactions) then it is a good thing.
    If 190000 extra mortgage transactions complete over 3 years, this is still a small number and will have little effect on the market as a whole
    I think it is a great idea.

  6. The government’s MiG scheme is not designed to create the next housing boom, is being designed to prevent a property crash until after the next election. The economy needs 30% correction on property prices before the economy can recover. We should stop burying our heads in the sand.

  7. @ Michael Brayne

    Spot On !

  8. Belinda Cusmans 27th March 2013 at 10:14 am

    Don’t believe everything you hear about the housing market recovery in the US, most of the properties are being bought up wholesale by corporations, not private buyers!. We should not be propping up a housing market that clearly does need to adjust in the light of a wage freeze virtually for everyone with the exception of the few, we all know who they are. Homes need to become affordable once again, this latest scam will not help that. I do agree that this is only about the next election, nothing more and nothing less!

  9. “It is a temporary, time-limited intervention in the housing market that addresses a market failure.”

    Can Mr Osborne explain how the market has failed? People can’t afford houses because their wages aren’t keeping up with house prices. House prices dropping to realine themselves with peoples wages is an example of the market working not failing.

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