• Subsidy to help the wealthy buy second homes?

    22nd March 2013 | News | Claire
  • The Daily Telegraph story is below and here – http://www.telegraph.co.uk/news/politics/9947031/Wealthy-homeowners-could-use-state-backed-loans-to-buy-second-homes.html ……………………………………………………………………………………………………………..

    George Osborne’s plans to underwrite the mortgages of hundreds of thousands of home buyers are mired in confusion after it emerged the scheme could help well-off people to buy second homes.

    The multi-billion pound scheme to put what ministers have called “rocket boosters” under the housing market was the centrepiece at the heart of Wednesday’s Budget.
    However ministers admitted yesterday that existing home owners could try to use the scheme to buy a second property.

    Official figures suggested that 190,000 people a year will benefit from the scheme, under which buyers will be able to provide a deposit of as little as 5 per cent, and the Government will underwrite 15 per cent of its value.

    Details published by the Treasury show that the scheme explicitly cannot be used by people applying for a buy-to-let or mortgage interest loan. However it did not rule out allowing a couple to buy a second home with a state-subsidised mortgage.

    Even if ministers acted to ban it, a couple could put their home into one spouse’s name and buy the second property in the other spouse’s name.

    Others could use the cash to buy a property and put it in their children’s name. Or someone could rent out their current home and buy a subsidised second home.

    Labour accused the Chancellor of providing “subsidised mortgages for millionaires”.

    Ed Balls, the shadow chancellor, said: “It seems that his mortgage scheme will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000.”

    He added: “Is the Government really going to give millionaires a tax cut averaging £100,000 and then give them a taxpayer guarantee if they use that money as a deposit on a house — a second home or even a home to buy to let?

    “Surely people struggling to get a mortgage and those who want to own their first home must be the priority for help, not the small number who can afford to buy a second one.”
    In a television interview, the Chancellor appeared to concede that the scheme could be used to add more than one house to a property portfolio. He said officials had not fully worked out details of the initiative.

    Mark Prisk, the housing minister, said that people would have to give a legal undertaking that they did not own other properties when signing up. However his department later clarified that he was talking about a different, smaller scheme in which the Government took direct stakes in people’s homes.

    The Treasury said the idea of state-backed mortgages for second homes was still under consultation as the issue was complex.

    A spokesman: “The intention of this policy is very clear: to help people get a home or get a bigger home for their family. But this is a very technical area – for example would you define a parent underwriting a mortgage for a child to help them get their first home a second home?

    “We have said that we are going to consult in order to get this right, instead of rushing into decisions or knee-jerk reactions. There is a separate issue of buy-to-let mortgages, which we have always made clear are excluded.”

    There have also have been warnings from campaigners and trade bodies that the scheme could create a new housing bubble leading to another crash in the property market.

    The Chancellor said he wanted hard-working people to “fulfil the dream of home ownership” but the Government would not put the taxpayer at risk by letting people borrow more than the value of their property.

    The scheme, which is enough to support £130?billion-worth of loans, is open to anyone looking to buy a new home worth up to £600,000.