Osborne is not the first-time buyer’s friend

George Osborne has no interest in helping people buy their first homes. The Help To Buy scheme solves two problems, neither of which is lack of affordable housing.

The first problem is that homebuilders have kept lots of inventory on hand since the crisis. This is the reason prices didn’t fall further, especially in the less desirable parts of London. (There are other good reasons why the price of say, mansions in Kensington has held up, mainly that God is not making any more Kensingtons.) Homebuilders would like to sell some of this stockpile, so that they can get leveraged up again and start building new homes and making money. They would prefer not to dump the stuff into a falling market. George Osborne is the friend of the homebuilders, and he would like them to start building again so that the economy gets ‘better’. So he came up with the first Help To Buy, which gives money to people to help them buy new builds.

But George Osborne is also the friend of the home owners, and also the friend of the buy-to-let landlords and the other landlords and property investors in general. Giving people free money to buy only new builds when no-one can afford to bid up another property bubble, could have caused a fall in the value of all other housing. The second part of Help To Buy is an attempt to maintain property prices in the face of weak economic growth, lack of risk appetite from lenders, and a possible resurgence of new building. Clearly it didn’t take a historian of finance to figure out that a good way to do this would be to borrow large amounts of money and invest them in the mezzanine tranches of subprime mortgages.

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