22/03/13
By Gavin Cordon
Wealthy householders will not be able to use government-backed mortgage guarantees to buy second homes, a Government minister confirmed on Thursday.
After a morning of apparent confusion in Whitehall, Housing Minister Mark Prisk insisted existing homeowners seeking to access Chancellor George Osborne's Help to Buy scheme would have to provide a legal undertaking they had sold their existing property.
Earlier Mr Osborne had repeatedly ducked questions on whether the scheme set out in Wednesday's Budget could be used by purchasers looking for a second home.
"Let's be clear, that is not the case," Mr Prisk told BBC Radio 4's The World at One.
"You would first have to divest your existing property prior to being able to proceed with any Help to Buy sale. This is about family homes. It is not about second homes.
"We do have details in there about making sure there is a legal declaration through a solicitor before someone can take on a purchase that they have got rid of their exiting property. That's all in there."
Earlier, Mr Osborne appeared unaware of the details of the scheme - one of the key planks of the Budget - saying only that the intention behind the scheme was clear.
"The intention of the scheme is absolutely clear, which is that it is for people who want to get their first home or have a home and want to move to a bigger home, because perhaps they have got a bigger family," he said.
"We are working with the industry to get a scheme that works."
The Chancellor also faced warnings that the £12 billion initiative risked creating a new housing market bubble.
Former Bank of England economist Erik Britton, of Fathom Consulting, said ministers were in danger of repeating the mistakes which led to the financial crash of 2008.
"The whole economy is in rehab. For 10 years ahead of the recession we were bingeing on debt, on cheap credit. We became addicted to it, specifically credit that's secured on housing," he told The World at One.
"Now, post the recession, I thought this Government was saying 'Understand that this is going to be a painful process of coming off that addiction'.
"Yesterday the Chancellor essentially said 'Hang on a minute, it's too painful, people aren't going to vote for this, so let's just go back on for a couple of years before the election'.
"I think it's nuts. I think it's the opposite of the right solution.
"What I fear will happen is that house prices will go up from an already overvalued position and households will take on even more debt from a position where they are vastly over-extended already.
"We will be back on the addiction to cheap credit which was the whole problem that pushed us into the crisis that we are already in."
Conservative MP Kwasi Kwarteng said that the Government should have concentrated on increasing the supply of homes.
"My worry with this is that having a system where you are giving mortgages without increasing the supply will lead to asset price inflation, because obviously if the amount of supply remains the same and you are making credit easier, the tendency would be for the prices to go up," he said.
"I think we could have announced something bolder that actually increased the supply of homes."
Mr Osborne, however, appeared to dismiss the suggestion that the property market remained overvalued.
"If we were in a housing boom then this is not the kind of intervention you would take," he said. "But actually our housing market is not properly functioning at the moment."
While he accepted that the country needed more homes, he rejected that the shortage could be met through increasing the supply of social housing.
"I do not think the solution to our housing situation is simply to build many, many more social homes," he said.
The Chancellor stressed that the Government had simplified planning rules so that homes could be built in "sensible places".
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