Chancellor George Osborne has asked the Bank of England to take a look at his controversial Help to Buy scheme, among fears that it could stoke a housing bubble. The move comes as Nationwide announced this morning that UK house prices have gone up 5% in the last year. It said house prices now stand at an average £172,514, up 0.9% over the month. Nationwide said the acceleration in house prices this year had been surprising.
At Osborne's request, the Bank will look at the two-part scheme each September and introduce controls if necessary.
The first part of Help to Buy was launched in April this year, and is a shared equity scheme on new-build homes only, giving purchasers access to 95% mortgages. The scheme has led to such demand that developers have increased sales, upped their workforces and reported running out of building materials including bricks.
The second part of Help to Buy is a taxpayer-backed mortgage indemnity scheme due to launch in January and which will apply to both new and secondhand stock, at up to £600,000.
The Bank of England could introduce measures to curb its effect, for example by making the insurance more expensive for lenders and thus increasing mortgage rates to dampen down demand. The Bank could also decide to reduce the £600,000 threshold, making the scheme less popular in expensive regions such as London and the south east.