Help To Buy May Increase Prices, Warns IMF
George Osborne's Help to Buy scheme may push property prices beyond the reach of British households, the International Monetary Fund has warned, in its most direct intervention yet on the new mortgage support policy.
The Fund's head of financial stability, Jose Vinals, said that the new scheme, under which the Government will guarantee mortgages, reducing the deposits homebuyers have to pay, may not help increase the supply of homes.
The warning comes only a day after the Fund raised its forecast for UK economic growth.
Mr Vinals said that while the initiative is aimed at "enhancing the access to owner-occupied housing," it was happening when the "housing market is already recovering quite well".
He added: "The goals are good from a social viewpoint, but if the scheme only increases demand for housing ? this may lead to even higher house prices which may reduce affordability of housing to the population.
"This is something that needs to be looked at."
The warning comes only days after the scheme, in which buyers will be able to take out mortgages with deposits as low as 5%†of the value, was formally introduced.
In an interview with Sky News, Mr Vinals also urged the Government to give the Bank of England new powers to intervene in the housing market.
He said the Bank's Financial Policy Committee needed the power to impose caps on the loan-to-value of mortgages handed out by UK banks.
Though such powers are commonplace elsewhere, the Treasury has so far not handed these controls to the Bank of England.
If they were in place, it would mean the Bank could effectively outlaw low-deposit mortgages if it believed they were causing a risk to the country's financial stability.
The Fund also warned on Wednesday that investors could be facing a potential loss of $2.3trn (£1.44trn) if the world's central banks cannot smoothly unwind the emergency measures carried out during the financial crisis.