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Unintended consequences?

The Budget's Unintended consequences for housing? Photo: Chris Radburn/PA Wire

Ideas in Budgets often seem like a very good idea at the time. But tonight, Treasury sources have admitted to ITV News that the Chancellor's big bright idea to put rocket boosters under the housing market could potentially help out some people who frankly, do not really need the cash. The scheme is obviously designed for people who want to buy a house but are struggling to get the cash together for the kind of massive deposits many lenders currently demand.

They have, as you would expect made some exclusions, so professional investors can not use the scheme for buy-to-let mortgages, and potential buyers must be able to afford the loan realistically, so interest only deals will not be part of it. But what Treasury officials had to admit tonight, when we put the question to them, is that they have not ruled out the taxpayer underwriting the mortgages of the well off who want to buy second homes. The Department for Communities is clear however, their shared equity scheme is specifically, and explicitly only available for people buying and owning one home. But the Treasury plan, the Mortgage Guarantee, right now has no such condition.

The Budget's Unintended consequences for housing? Credit: David Cheskin/PA Wire

The list of criteria that the Treasury supplied for people who want to use the Mortgage Guarantee is below. I rather suspect that by the time the scheme becomes law, the list of those not able to take advantage of very generous guarantees from the taxpayer might be rather longer. Watch this space. At the very least, it is potentially a rather embarrassing miss for the officials who sweated so hard to get the precise details of this Budget right, after the 'omnishambles' of last year.

Mortgage eligibility

3.8 The scheme is designed to help creditworthy households struggling to save for the high mortgage deposits required by lenders in the current environment. For this reason, a mortgage eligible for a guarantee under the scheme will need to:

  • be a residential mortgage, and not buy-to-let;
  • be taken out by an individual or individuals rather than an incorporated company;
  • be on a property in the UK with purchase value of £600,000 or less;
  • have a loan-to-value of between 80 per cent and 95 per cent;
  • be originated between the dates specified by the scheme;
  • be a repayment mortgage, and not interest-only; and
  • meet certain minimum requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to-income and credit score test.

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