1. Approach
2. Characteristics and Political Motivation of the Help to Buy scheme
3. The Economic Perspective of Help to Buy and its possible impacts on the UK Economy
4. Conclusion and Prospects
Table of Contents
1. Approach
2. Characteristics and Political Motivation of the Help to Buy scheme
3. The Economic Perspective of Help to Buy and its possible impacts on the UK Economy
4. Conclusion and Prospects
Objectives and Themes
The paper critically examines the UK government's "Help to Buy" mortgage guarantee scheme, evaluating whether it serves as a viable economic recovery policy or a risky political maneuver that could lead to an artificial housing bubble.
- The macroeconomic motivation behind the "Help to Buy" scheme.
- Keynesian perspectives on housing market activity and consumer demand.
- Direct and indirect economic impacts of property demand on the UK labor market.
- Critical analysis of risks regarding subprime mortgage parallels and the "Agency Problem."
- Long-term implications for wealth distribution and economic equality.
Excerpt from the Book
The Economic Perspective of Help to Buy and its possible impacts on the UK Economy
Economically Help to Buy can be considered as a macroeconomic policy trying to stimulate the housing market and to fight recession. Based on a Keynesian approach to economics such measures gear towards an increase in aggregated demand and therefore to an increase in actual GDP (Fyfe and Threadgould, 2013, p. 71). The question arises why the government is trying to push the housing market and how especially housing activity can contribute to the recovery of the UK Economy.
Since housing activity is linked to many other industries such as the construction industry it acts as a multiplier of demand. That´s why the health of the housing market is generally of crucial importance to the health of the overall economy (Summers, 2011). Talking about possible effects of boosting the housing market to the UK Economy you have to distinguish between direct and indirect impacts.
The most obvious direct effect of Help to Buy is increasing demand for property which leads ceteris paribus to rising house prices. Therefore building new houses is more profitable and construction companies are encouraged to expand their business in order to increase supply and to catch up with the demand. Recently the British house builders Bellway (Reuters, 2013) and Barratt Developments (BBC News, 2013) reported that they have already benefited from the higher demand fueled by Help to Buy and there further expectations are even better. As a consequence jobs are created and household´s income is rising.
Summary of Chapters
1. Approach: This chapter introduces the post-recession economic climate of the UK and outlines the purpose of the Help to Buy scheme as a governmental tool to stimulate market recovery.
2. Characteristics and Political Motivation of the Help to Buy scheme: This section details the operational mechanics of the mortgage guarantee scheme and explores the political incentives for the government to boost the housing market ahead of elections.
3. The Economic Perspective of Help to Buy and its possible impacts on the UK Economy: This chapter provides a critical macroeconomic analysis, weighing the potential benefits of increased consumer confidence against the significant risks of fostering a housing bubble similar to the subprime crisis.
4. Conclusion and Prospects: The final section synthesizes the findings, concluding that while the scheme provides short-term stimulation, it carries long-term risks for economic stability and social equality.
Keywords
Help to Buy, UK Economy, Housing Market, Mortgage Guarantees, Recession, GDP, Consumer Confidence, Housing Bubble, Keynesian Economics, Subprime Mortgage, Agency Problem, Economic Recovery, Wealth Effect, Property Prices, Fiscal Policy
Frequently Asked Questions
What is the primary subject of this assignment?
The assignment investigates the UK government’s "Help to Buy" scheme, analyzing its role as an economic recovery tool and its potential dangers.
What are the central themes discussed in the paper?
The paper focuses on the construction industry's role as a multiplier, the influence of household income on consumption, and the systemic risks of government intervention in mortgage markets.
What is the core research question?
The author explores whether the "Help to Buy" scheme is a "policy of genius" that stimulates growth or "economic idiocy" that risks a disastrous housing bubble.
Which economic theory is primarily utilized?
The assignment applies a Keynesian economic framework to assess how government spending and demand stimulation affect the overall UK GDP.
What is covered in the main body of the text?
The main body examines the structural characteristics of the scheme, the direct and indirect economic impacts of property demand, and comparisons with historical financial crises.
How is the "Help to Buy" scheme defined by the author?
The author characterizes the scheme as a controversial, short-term anti-recession measure that carries significant risks of creating an artificial property bubble.
What does the author suggest regarding the "Agency Problem"?
The author argues that there is an Agency Problem where mortgage lenders may engage in irresponsible lending to maximize profit, knowing that a portion of the loan is backed by government guarantees.
How does the author relate the scheme to the next general election?
The paper suggests that David Cameron’s government uses the scheme to boost the housing market as a political tool to foster optimism and support before the upcoming election.
- Arbeit zitieren
- Simon Bergstein (Autor:in), 2013, UK Government ‘Help to Buy’ scheme, München, GRIN Verlag, https://www.grin.com/document/270956
