Morning Call: pick of the papers

The ten must-read comment pieces from this morning's papers.

1. Lost illusions on Europe (Financial Times)

Britain needs to adopt a hard-headed approach founded on the national interest – and hold a referendum, says an FT editorial.

2. Nothing in British politics is harder than welfare reform. The dogfight over it is a distraction (Independent)

The goal of delivering a fair, affordable welfare seems as distant as ever, writes Steve Richards.

3. How to follow the public money in a privatised NHS (Guardian)

Without basic financial transparency from public service contractors we can say goodbye to democratic accountability, writes Zoe Williams.

4. Losing one Lord a-leaping is unfortunate. Losing three at once should make Mr Cameron very worried indeed (Daily Mail)

The chances of the coalition fracturing completely are now perhaps higher than ever, says Simon Heffer.

5. Welfare cuts may bite the UK government (Financial Times)

When incomes rise and the Treasury refuses to raise social security, everyone will complain, says Chris Giles.

6. Europe’s dogmatic ruling class remains wedded to its folly (Daily Telegraph)

Proclamations of the euro’s salvation owe more to ideology than to the facts, says Peter Oborne.

7. Is the millennium’s biggest ego trip over? (Times) (£)

The left fête him as an anti-capitalist, anti-American saviour, but Hugo Chávez is just a strutting narcissist, says David Aaronovitch.

8. Don't dismiss privatised classes (Independent)

In education as in probation, public services must be about practicality not ideology, says an Independent editorial.

9. Tinker, tailor, soldier... and a central banker (Daily Telegraph)

The Treasury’s cloak-and-dagger interviews are hardly an advert for open government, writes Sue Cameron.

10. US energy: state of (semi-) independence (Guardian)

The relationships that America has with the rest of the world are bound to change both in scale and in intensity, says a Guardian editorial.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.