Business Secretary Vince Cable suggested over the weekend that the Government should reconsider its Help to Buy scheme amid fears that it has boosted house prices too quickly and could cause a new housing bubble.
Dr Cable told Andrew Marr yesterday (December 22) that the scheme needs to be looked at again, as it was conceived “in very different circumstances” and is also causing concern for ratings agency Standard & Poor’s, which re-awarded the UK a triple A rating only last week,
Concerns have grown as, under the second phase of the scheme, first-time buyers need only provide a small deposit when buying a property, with the Government offering a guarantee of 15 per cent of the loan on homes valued at no more than £600,000.
It has been suggested that these new loans are fuelling an artificial demand for property and critics have expressed concerns about how it can be brought to an end.
However, the Bank of England, which has been given a ‘tool kit’ by the Government to act if prices rise too fast, says that it is watching the housing market very carefully.
A spokesperson for the Bank said that it will use its powers to make sure a “free-for-all” in the mortgage market is avoided. They added that the regulator could force banks to hold more capital or ask for more stringent mortgage checks should the need arise.
The Bank has already refocused the Funding for Lending Scheme (FLS) on business rather then on individuals. Under the scheme, banks and other lenders could borrow money at very advantageous rates from the Bank as long as they passed them on to borrowers.
Dr Cable remarked that the decision to reform the FLS terms had been “very wise”.
