The Government should create a first-time buyer guarantee fund with money raised from the Banks

Following my recent blog regarding breaking up the Banks, George Osborne has announced he will increase the Banks’ Tax – raising an extra £800m for the Exchequer. This makes good headlines and also appears to be a good political move in light of expected Bank announcements regarding bonuses. Taking more money away from the Banks, however, while trying to encourage them to increase lending appears to me to be two actions which are at odds with each other. At the moment the Banks are unsure of the housing market hence their reluctance to lend which is increasing the uncertainty and has the property market locked into a downward spiral. The only way to break this spiral is with Government intervention and I would urge the Chancellor to use the extra £800m he has raised from the Banks to create a first time buyer guarantee fund. This would help first time buyers back into the property market which would help stabilise the property market, increasing the Banks’ confidence and thus increasing the amount that they are prepared to lend by way of mortgage finance.

ps Since writing this blog the Scottish Government have announced their plans to help First time buyers. Whilst I welcome any initiative in this area I don’t think the proposals are enough to really help the market I will revisit the issue of First time buyers shortly

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