Treasury tweaks needed on Mortgage Guarantees

The taxpayer-backed Mortgage Guarantee scheme may have some unintended consequences. Photo: Rebekah Downes/PA Archive/Press Association Images

The Treasury still will not explicitly say they will not allow homeowners to take out a second residential (not buy-to-let) mortgage, under the taxpayer-backed Mortgage Guarantee scheme.

(NB - When the Housing Minister, Mark Prisk, ruled it out earlier, he was talking about the Department for Communities shared equity scheme, not the much bigger Treasury Guarantee scheme).

That is what has led Labour to slam them for offering a "spare home" subsidy to the well off. As we revealed last night, the Treasury did not exclude the possibilities of buying second homes under the scheme in the Budget documents.

Officials recoil from this idea, saying that is not at all the intention of the policy. So why did they not insist in the Budget that the scheme would only be available for a person's only home? Then it could have been simple to see that it was intended only for people who wanted to buy their first, or a bigger home to live in.

They could, quite easily, have explicitly said on the list the Mortgage Guarantee would only be available if used for someone's primary residence, to use the jargon. But they have not yet ruled out allowing second mortgages to be taken out under the plan because in some circumstances, for example someone buying a home for their adult child or someone going through a separation, they believe it might potentially be a good use of the scheme.

It is very early days, and the Government has a year to work out exactly how it will work. But without excluding second residential mortgages, policing who comes forward could be horrendously tricky.

One of the problems with any policy is that everyone's definition of what is fair is not the same. For some voters, the idea of helping a well-off family with a mortgage to buy a home for their child at university would be deeply unfair. For others it might be extremely welcome, and an entirely appropriate way of using the public balance sheet, especially if it gets the economy going too.

What about help to buy a home for an elderly parent or carer? Hard to object to that. But what about a couple who use the Mortgage Guarantee to buy a home that some members of the family might occasionally use, but primarily is a nice bolthole for them to use on weekends and during the holidays?

The Treasury is clearly committed to trying to find a policy that could help many millions of potential home buyers. They clearly do not intend to design a policy that will allow the well heeled to benefit unfairly. But this row demonstrates how difficult this policy could be to police - how important it will be to get the details right.

For now they tell me they are consulting on the policy, Labour's criticisms are just "anti-aspiration".