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Will 'Help to Buy' Actually Help Anyone?

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Like any power couple, David Cameron and George Osborne are incredibly busy - and consequently, they don't have time to make new mistakes. Instead, they'd rather repackage the regurgitated innards of old policies the global economy has already chewed up and spit out. So enters the coalition's coveted 'Help to Buy' scheme.

Now, it's not hard to see why the Tories are frantically shoving their new shared equity scheme down the nation's throat. After all, the tagline is fantastic: 'cheap mortgages for hard-working people'. At first glance, Help to Buy comes off as some sort of humongous victory for the common man - helping working-class sods reach the lowest rung on the property ladder, and regenerating Britain's rotten real estate market all in one go.

As always, it only takes a tiny sprinkle of historical context to kill the dream.

First and foremost, it's worth pointing out that Help to Buy is (as advertised) without doubt providing a boost to the market. The policy essentially allows authorities to help aspiring homeowners cover the cost of their new properties 20/80 - unsurprisingly leading to a huge surge in demand for homes of all shapes and sizes. Textbook economics dictates prices should increase with demand, which generally goes on to spread the nation's wealth and benefit the entire economy. True to principle, in its first phase the scheme has lifted house prices to their highest annual rate in over three years. But the honeymoon will be short-lived.

Sure, it would be nice to set back our financial clocks by a decade and pretend the government's massive investment in the single most volatile industry on earth will somehow benefit voters in the long run - but at the end of the day, housing bubbles are made to pop. With that in mind, we should be slightly worried this entire Help to Buy scheme is little more than a sad rehash of the sub-prime mortgage crisis that brought the entire global economy to its knees in 2008.

A couple decades ago, cheap mortgage lenders in America decided to risk everything by subsidising housing costs to give buyers a helping hand - at great personal gain. Yet whilst bankers were basing these deals upon the misguided presumption that prices and demand would only continue to skyrocket, no one seemed worried that interest rates would inch forward, too. By the time homeowners realised they could no longer afford their monthly payments, it was too late - and an influx of foreclosures and bankruptcies helped to bring down institutional giants like Fanny Mae and Freddie Mac. The entire financial world tumbled with them.

Here we are, five years later - and what have our politicians learned? Apparently very little, apart from their widely-held belief that voters possess incredibly short-term memories. They'll be in for a shock. Seventy percent of British voters think Help to Buy will raise home prices unattainably high, whilst 58% believe the equity scheme will unleash another housing bubble destined to explode right in the coalition's face. With pressure mounting on Mark Carney to raise the country's base interest rate from its artificially low 0.5%, that explosion appears imminent.

But it's hard to say where that pitiful self-awareness leaves aspiring British homeowners. Cheap lending and surging prices are basically all that's fuelling the country's fragmented economic recovery - so, if we drop the Help to Buy scheme now, the real estate market will wither and Britain's impressive economic growth could die along with it. Such a hit would be better for business in the long-term, as it would allow firms to search for more sustainable growth methods. It'd also be better for the average Brit, who won't be rushed into taking on a mortgage they may not be able to afford ten years down the line.

But that's bad politics - and if the Tories let on that they don't know how to fix the economy, they can kiss the 2015 election goodbye. Then again, if history is allowed to repeat itself, there's a pretty good chance the election is already lost.

Around the Web

Help to Buy: home ownership schemes - GOV.UK

BBC News - Strong start for Help to Buy, say lenders

Help to Buy Government Mortgage Scheme - Rightmove

Help to Buy: More evidence of a property boom (and why it's a bad ...

Cameron says 2000 mortgages approved on UK 'Help to Buy' scheme

Help to Buy has raised risk of house price bubble, economist warns

Controversial Help to Buy scheme aids social mobility, claims David Cameron

Video: Help To Buy 'Aids Social Mobility'

George Osborne's Help To Buy Scheme Helps Hundreds Who Already Own ...