The head of mortgage policy at the Building Societies Association said that lenders could quickly become over-reliant on what was meant to be a “temporary measure” to bring bigger players back into lending.
Mr Broadhead disagreed with numerous Bank of England officials who believed the scheme could fuel a housing bubble, but warned that an eventual drop off in lending could take the market back to “square one” unless an exit strategy was put in place.
He said: “One of the biggest questions surrounding Help to Buy is the exit plan. It was only ever meant to be a temporary measure to bring big banks back into lending, but the same was said about Fannie Mae, and we do not want a repeat of what happened there in 2008. There has to be a clearly thought-out exit strategy because the longer it continues, the bigger the transactions will be.
“The danger is that the banks will get used to it and, having gone from a famine to feast in lending terms, a sudden end to the scheme could cause banks to go back to square one. The problem is that the government has yet to articulate that exit strategy.”
Concerned about fears of the scheme’s influence, three former chancellors of the exchequer joined calls for current incumbent George Osborne to rein in the second phase of Help to Buy.
Kevin Hever, adviser at Midlands-based Cornerstone Financial, said: “The Help to Buy has been a great lifeline for first-time buyers. That help will need to continue over the coming years, especially if property prices rise and if deposit requirements remain the way they are. MMR will also make it more difficult in terms of affordability.”