The 95% mortgage scheme being launched under the Help to Buy flag in January could have serious and unintended consequences, MPs have warned.
The Treasury Select Committee’s comments will be seen as a severe blow to George Osborne, who unveiled the package in last month’s Budget, which will see up to £130bn of taxpayers’ money underwriting mortgages from early next year.
The first part of Help to Buy is already under way, offering £3.5bn of shared equity loans to buyers of new-build homes only.
The mortgage indemnity part of the package will apply to the entire housing market – not just new homes – and will be available for first-time buyers and home-movers.
But in a report on the Budget, the cross-party group said the plans were vague, left the Government exposed to large potential losses, and would not effectively tackle problems in the housing market.
Committee chairman Andrew Tyrie said the loan guarantees “may have a number of unintended consequences”. He also said that any decision to continue with the scheme should be made by the Government on the basis of advice from the Bank of England.
The report said: “It is by no means clear that a scheme, whose primary outcome may be to support house prices, will ultimately be in the interests of first-time buyers.”
The Council of Mortgage Lenders has made it plain that it views the Help to Buy scheme very differently from the Treasury Select Committee.
CML economist Bob Pannell said: “The Help to Buy mortgage guarantee scheme – while still embryonic as yet – holds significant firepower, and has the potential to increase activity from 2014.”
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