The government’s Help to Buy mortgage guarantee scheme does not pose a material risk to financial stability and is not contributing materially to house price growth, Mark Carney, the Bank of England’s governor said.
To ensure the stability of the UK housing market, chancellor George Osborne had asked the Financial Policy Committee to advise him every September whether the key parameters of the scheme - the house price cap and the fee charged to lenders - remained appropriate.
In a letter to the chancellor, Mr Carney concluded that: “There has been strong house price growth in some regions but, in the committee’s judgement, the scheme does not appear to have been a material driver of that growth.
“[This is backed up by] Official Statistics on the use of the scheme published on 2 September confirm that the scheme continues to support responsible lending to first-time buyers across all regions of the UK on properties well below the average UK house price.”
Recent data published by the Treasury revealed there were 11,000 house purchases through the programme in the three months to the end of June, up from the 7,321 supported in the scheme’s first six months of operation.
In response to Mr Carney, Mr Osborne said that the scheme “continues to support responsible lending to first-time buyers across all regions of the UK on properties well below the average UK house price”.
Earlier in the summer the European Commission warned the chancellor George Osborne that the mortgage support scheme must be reined in to stop house prices getting out of control.
Recent figures stated that the average Help to Buy house price was £153,800, significantly below the national average, and buyers were spread out across the country, with 94 per cent outside of London.
The scheme has helped first time buyers in particular, who have accounted for 79 per cent of the 18,000 scheme completions to the end of June.
The FPC also confirmed that the scheme supports responsible lending, noting that the latest data gives no evidence of “looser underwriting standards within the scheme than on wider lending”, and that the scheme supports responsible lending.
The FPC said: “Help to Buy loans do not seem to have driven an increase in average mortgage tenors for the high LTV market since the launch of the scheme.”
This was supported yesterday by new rules for lenders participating in the scheme. It was announced that mortgage lending limits introduced by the Bank of England would apply to all Help to Buy mortgage guarantee loans and must therefore have a loan to income ratio of less than 4.5x multiples.
