Prime Minister David Cameron defied critics of his government’s “Help to Buy” program to aid Britons frozen out of the property market by the need for high deposits, saying the second phase will start next week, three months earlier than planned.
The plan has drawn criticism from the International Monetary Fund and Business Secretary Vince Cable, who say it may spark a property bubble. The first phase, interest-free loans for buyers of newly built homes, began in April and has already contributed to the strongest housing market since the financial crisis.
The second will provide government-guaranteed mortgages for buyers with a deposit of as little as 5 percent of the value of a home costing as much as 600,000 pounds ($968,000). The guarantees are meant to spur 130 billion pounds of mortgage lending.
“I am not going to stand back as people’s aspiration to buy their own home is being trashed,” Cameron told BBC television’s “Andrew Marr Show” in Manchester, northern England, where his Conservative Party begins its annual conference today. He said the nation should put its trust in the Bank of England, which has “tools to stop bubbles from occurring.”
Royal Bank of Scotland Group Plc (RBS), its NatWest unit, and Halifax, the mortgage unit of Lloyds Banking Group Plc (LLOY), confirmed they will offer 95 percent Help to Buy mortgages, Cameron said on his Twitter feed.
Chancellor of the Exchequer George Osborne said Sept. 27 he will introduce checks every September on the program with the Bank of England in response to concerns it might spark a bubble. The bank’s Financial Policy Committee will advise Osborne on whether key parameters, such as the price cap and the fee charged to lenders, remain appropriate.
Data last week showed home values rose the most in more than a year this month and the FPC said it’s ready to act if any risks to stability emerge.
Osborne and Cameron said today that concerns about an unsustainable housing market are limited to central London.
“Talk of a housing bubble to people here in Manchester or Salford and they would literally laugh in your face,” Cameron said. Osborne told BBC Radio 5 the concept of a housing boom is “very, very remote” for people outside of London.
Cameron responded to criticism from the Labour Party he is doing too little to address the cost of living, after opposition leader Ed Miliband pledged a freeze on energy prices if he wins the 2015 election at his party conference last week.
Cameron attacked the plan as “anti-business, anti-enterprise” and “nuts, frankly.” The premier defended how the energy market is functioning, saying “I don’t accept that all the regulation is failing. Putting people on the lowest tariff is having an effect as we speak.”
Cameron reiterated his opposition to the so-called mansion tax, a levy on houses valued at more than 2 million pounds that’s favored by Miliband and Liberal Democrat leader Nick Clegg.
“To go after someone’s house every year with a wealth tax, I don’t think that is a sensible thing to do,” Cameron said.
Cameron insisted the planned high-speed rail link from London to northern England, known as HS2, is “going to happen” after Labour raised doubts over the rising costs.
“The choice is do we build an old-style Victorian” line “or do we build one of the new high-speed lines,” Cameron said. “In the next Parliament we’ll be spending more than three times as much on other transport projects as we will on HS2. It’s not taking up an unfair share of the budget.”
In an interview with the Sunday Telegraph newspaper, Cameron said that the European Union deserves “one last chance” to reform itself. He ruled out a referendum on continued British membership before 2017, after suggestions Tory rank-and-file lawmakers may try to amend the EU referendum bill when it is debated in Parliament later this year, calling for the vote to happen in 2015.
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