Help to Buy: Vince Cable warns George Osborne of house-price bubble risk

 
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Vince Cable today dramatically called for Chancellor George Osborne to rethink a flagship scheme to help home buyers and warned of the dangers of a “housing bubble” in London.

The Business Secretary raised the alarm about the Help to Buy scheme which is due to be extended in January to cover far more home buyers than just those purchasing a newly built house or flat. “We should certainly think about how it should come into effect, indeed whether it should come into effect in the light of changing market conditions,” he told Sky News.

Former Bank of England governor Lord King and Labour ex-Chancellor Alistair Darling have raised concerns that Help to Buy could send house prices spiralling. Mr Cable said he doesn’t think this is an issue in Northern Ireland or Wales or the East Midlands, but added: “Certainly in London and the South-east, in north-east Scotland, in other areas, there are serious housing inflationary pressures.”

House prices in the capital are already rising eight per cent a year. From 1 January next year, the Government’s mortgage guarantee scheme will help people buy a home worth up to £600,000 with a deposit of only five per cent of the purchase price.

Mr Cable later warned in a speech against “complacency” on the economy as Mr Osborne trumpets signs of a strengthening recovery. While insisting he supports Mr Osborne’s comments on positive signs, he stressed the economy remains in a “long, dark tunnel”.

Mr Cable also clashed with Home Secretary Theresa May today calling on her to be more “sensible” on security bonds for immigrants coming to Britain. He expressed some “sympathy” for Liberal Democrat MP Sarah Teather who is quitting Parliament at the next election in dismay at immigration and welfare policy.

He believed the Brent Central MP had “overreacted” after Deputy Prime Minister Nick Clegg said some immigrants would need to pay a bond, possibly £1,000, to come into the country. But he revealed details of a Cabinet rift on the planned bonds which some immigrants from “high-risk” countries will have to pay.

“What Nick Clegg actually proposed was that if somebody in the subcontinent, for example, is turned down for a visa, they could as an alternative come up with a bond,” he said. “But the way some of our colleagues in the Coalition interpreted it was in a much more negative way, of saying that everyone who comes here should pay this very large bond.

“Reaction to it from our friends in India and elsewhere, where we’re trying to build up a lot of trade and have very good relationships, is one of outrage and I think we’re going to have to do this in a much more sensible way.”

The Home Office declined to comment.

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