Osborne’s Help to Buy scheme could be used for second homes

Shadow Chancellor Ed Balls accused Mr Osborne of offering “subsidised mortgages for millionaires” through his ambitious Help to Buy scheme, which formed the centrepiece of the Budget statement on Wednesday.

Second-home ownership causes enormous concern in many rural parts of Yorkshire, forcing up house prices for local people while leaving community facilities such as village shops and pubs bereft of custom for large parts of the year.

“We would be very concerned against anything that makes it easier for people to buy second homes,” said Coun John Blackie, the leader of Richmondshire District Council in North Yorkshire.

“It would be the last thing we would want from the Government – it goes dead against everything we are trying to do in the Dales.

“Local people are finding it impossible to get on the housing ladder already due to the way house prices have been forced up. We’re seeing villages beginning to die.”

Mr Osborne insists the new Help to Buy programme will help hundreds of thousands of people who want to buy their first home or move to a larger house.

Speaking at lunchtime yesterday, Housing Minister Mark Prisk flatly denied the initiative could be exploited by people purchasing extra properties. He said applicants would have to provide a legal undertaking that they had sold their existing home.

However, within hours Treasury sources were being forced to clarify the remarks, insisting Mr Prisk had only been referring to one element of the scheme – where the Government offers equity loans to people needing a deposit to buy a new-build property.

The second part of the scheme, due to be in operation in 2014, involves the underwriting of mortgages for people looking to buy a property worth less than £600,000 – potentially including a second home.

Speaking in the Commons, Mr Balls contrasted the policy with plans to reduce housing benefit for families with spare rooms.

“The Government is basically saying that if you’ve got a spare room in a social home you’ll have to pay the bedroom tax, but if you want a spare home we’ll help you buy one,” the Shadow Chancellor said.

“We will only tackle the housing crisis and help first-time buyers if we finally build the new affordable homes that should be at the heart of any proper plan for jobs and growth.”

Mr Balls also warned the housing guarantees may further inflate property prices. “Unless the houses are there for people to actually go and buy this could lead to higher prices rather than jobs and growth in the housing market,” the Labour MP for Morley and said.

Asked repeatedly about the second home issue, Mr Osborne was unable to say whether wealthy people could use his scheme to buy extra properties – adding that full details of how the scheme will work have yet to be agreed.

“The mortgage market is an extremely complex thing,” the Chancellor said.

“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. We are working with the industry to get a scheme that works.”

Mr Osborne appeared to reject the idea put forward by many economists that the property market remains 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.”