Osbourne: Help to buy could inflate market

WALSALL, U.K. - Oct. 4, 2013 - PRLog -- George Osborne has conceded that his £130bn Help to Buy lending scheme could artificially inflate the housing market asking the Bank of England to monitor the initiative’s effect on property prices two years earlier than scheduled.

The chancellor said he wanted to enlist the help of the the bank to examine ways to improve the scheme – which from January will underwrite mortgages for buyers with deposits as low as 5% on houses worth up to £600,000.

Under the plan, Osborne has given new powers to the bank’s financial policy committee (FPC) to report annually on the scheme, with the first review next September. The regulator had been due to look at it after three years when its first phase concluded.

The treasury said the committee will advise it on ‘whether the key parameters of the scheme- the price cap and the fees charged to its lenders – remain appropriate.’

It is understood that this means Bank of England governor Mark Carney, who chairs the committee, will consider capping the scheme at below the current £600,000limit to reduce the possible impact in London and hiking the fees charged to banks for using the scheme to deter risky lending.

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