Despite the Bank’s Financial Policy Committee (FPC) saying earlier this week that it was relaxed about the possibility of a property boom because it is keeping an eye on the market, Chancellor George Osborne has said that he has asked the FPC to work with him and advise on whether the key parameters of the scheme remain appropriate.
From January the Help to Buy initiative will provide mortgage guarantees on properties worth up to £600,000 but the FPC will make annual reviews and could recommend that the cap is reduced, although in initial plans it had only been due to assess the scheme after three years. The Committee could also make loans more expensive by recommending that the Treasury raises the fees paid by lenders for the guarantees.
The Help to Buy scheme was originally launched to help buyers of new properties and a second, potentially much bigger phase is due to begin in January, which will assist buyers who might otherwise be unable to afford a deposit on a home. Up to £12bn of government guarantees could spur as much as £130bn of new mortgages.
Since the second stage of the plan was announced in March, the housing market has shown signs of recovery, especially in London, where prices have jumped by about 10 percent from 12 months ago.
However, critics of the scheme have said it risks fuelling an unsustainable rise in house prices, with Business Minister Vince Cable in particular expressing his concerns about the programme.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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