One of the rabbits that the Chancellor pulled out of the hat in this afternoon’s budget was extra help for up to 10,000 first time buyers. What a great idea!
But, hold on, I’m sure I’ve seen this rabbit somewhere before…
FirstBuy announced today provides a 20% equity loan (jointly funded by the government and house builders) to help first-time buyers get a home. First-time buyers put down a deposit of 5% and get a mortgage on the rest.
HomeBuy Direct provided a 30% equity loan (jointly funded by the government and house builders) to help first time buyers get a home. Sometimes they had to pay a deposit and sometimes not, (depending on their lender) and they got a mortgage on the rest.
However, this awful HomeBuy Direct scheme was axed in the autumn and was described by Grant Shapps as “a very expensive flop”.
Thank goodness that they’ve introduced FirstBuy to replace it.
Alternatively, they could have maintained funding in HomeBuy Direct for the past seven months, especially as house builders are willing to match the government’s money (extra bang for your buck).
The real value of these programmes is that they keep house builders building because they provide a guaranteed stream of first-time buyers to buy the homes they produce. Without that confidence, they don’t build because they fear there’s no one to buy the homes. All quite simple really: create demand and underpin supply.
If they’d have stayed the course, they might have given extra ballast to a construction industry that was providing a big portion of the economy’s job and growth (a third of all growth in Q2 of 2010 and a quarter of all growth in Q3 of 2010). In Q4 of 2010, residential construction collapsed and the economy shrank by 0.6%.
Behind these figures are people who lost jobs they could have kept if the government hadn’t scrapped then re-introduced exactly the same policy. Complete stupidity.