We’ve been helped to buy, now what next?

Heaven never helps the men who will not act.

We asked for Government help to boost the housing market and we got it, eventually.

Help to Buy, the Coalition Government’s initiative that guarantees part of the mortgage so that people who couldn’t scrape together a huge deposit still get a chance to get on the housing ladder has, by and large, proved to be a good thing.

It is, however, a finite pot of money and questions are, quite rightly, being asked about what will happen when it runs out. Even Lord Lamont, the former Chancellor of the Exchequer (and a man who you’d think might know what he’s talking about), has warned that it isn’t a magic potion to solve all ills. He believes, not unreasonably, that there is a danger that the scheme could encourage individuals to take on too much debt.

That was partly what got us into this mess in the first place and it’s certainly what got us into the one. in the 1980s. We don’t have a housing bubble at the moment, Lord Lamont told a Barnett Waddingham’s Annual Pensions Conference a few weeks ago, but there will always be a danger of one developing and it is in no-one’s interest that houses should become more unaffordable.

Lord Lamont’s concern is that Help to Buy may encourage people with 95% mortgages to gear up too much. A not unreasonably worry. Especially since the improving economy is taking us ever closer to the 7% unemployment marker, the point at which Mark Carney, the Governor of the Bank of England, would be prepared to put up interest rates.

And thereby lies the danger. Stretched to the limit on a 95% mortgage may well be fine when the rate of your mortgage is 2%, but it doesn’t have to rise by much to make things very tricky indeed. We really don’t want to government to have to dip into its pot to make good on its guarantees too much. If they spend everything they’ve put aside then there will be a hole in the finances somewhere. And we all know what happened last time a government had to fill a deficit in its finances (clue: it’s still happening now).

Scarily, I saw an article this week which warned that house prices could rise 8% over the next two years because of the age-old supply vs demand conundrum. An 8% rise in the value of your house is one of three things, however: 1) immaterial because you have no intention of moving, 2) jolly nice because you plan to downsize and all that extra cash would make a real difference to the affordability of your next house or 3) scary because it means your wages haven’t risen at all, so your earnings to house price ratio is completely unaffordable.

There is a generation of people coming through from schools, colleges and universities, entering the employment field for the first time for whom home ownership is a nothing more than a myth, something their parents and grandparents talked about. And while rents and living costs remain such a high proportion of take-home income, that is only going to continue to be a problem.

So, on that happy note, let’s hope that 2014 sees the recovery continuing without running away with itself and overheating. None of us wants to go through that again anytime soon.

Merry Christmas!