Government house-buy scheme will increase debt, say critics

By agency reporter
19 Mar 2012

Critics have accused the UK coalition government's NewBuy scheme of being an irresponsible attempt to entrench unaffordable house prices which will stoke up household debt.

The government recently announced that the new scheme will provide 95 per cent mortgages for anyone seeking to purchase a newly built home.

Under NewBuy, the British tax payer will guarantee 5.5 per cent of the sale price, with the construction firm underwriting a further 3.5 per cent - allowing existing and new-time buyers to take out a 95 per cent mortgage on property with a value up to £500,000.

This scheme will entrench artificially high house prices, encourage British households to take up further unaffordable debt, and sow the seeds for a damaging and artificial house price boom, say critics.

The Green Party of England and Wales has been especially critical. Jenny Jones, their London Mayoral candidate, commented: "This is a cynical attempt by our Government to offload the cost of deficit reduction onto ordinary people. Instead of stumping up the capital to boost housing construction themselves, the Government is asking British people and families to take out yet more debt in order to pay for new-builds. This will lock in unaffordable house prices that risk another credit crisis."

Ms Jones continued: "A Green alternative would be to stop pumping quantitative easing into banks, and instead invest directly into the real economy. If the Government was serious about reducing unemployment and creating affordable homes, it would finance the construction of new property itself. This would rein in an extortionate housing market, bring down property prices and produce valuable public assets."

Natalie Bennett, a Green candidate for the London Assembly, added: "Not only is this scheme deeply unfair, but it is swelling a second housing bubble - like the one that caused the credit crunch. As with the university tuition fees and the NHS, Tory ideology is using the recession as a smokescreen to strip back regulation and unleash market forces. They are rebuilding the very foundation of irresponsible capitalism that widened inequality over the past 30 years which brought about economic crisis in 2008."

The Green Party says it would also like to see the notion of "right to rent", rather than "right to buy", highlighted.

[Ekk/3]

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