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Help to Buy threatens financial stability MPs warn
by David Campbell on Oct 08, 2013 at 07:59
The government’s Help to Buy scheme risks destabilising the economy and stoking an asset price bubble while doing little to stimulate new house building, a cross-party group of MPs has warned.
The Treasury Select Committee (TSC) said that the scheme would need extremely careful administration and called for increased oversight of its impact by the Bank of England.
‘Mistakes could distort the housing market or carry threats to financial stability,’ said the TSC in a statement.
‘We continue to believe that the government of the day will face strong incentives to extend the scheme, with the attendant risk that the mortgage guarantee scheme becomes a permanent feature of the UK mortgage market.’
The programme will subsidise deposits of up to 15% for house purchase, with the purchaser putting down 5% of the sale price, and could cover as much as £130 billion of new mortgage lending.
While initial reports suggest that the scheme has sparked widespread interest and pushed housing activity to the highest level since the credit crunch, critics warn that it risks overheating house prices and leaves the government heavily exposed to price risks.
The committee issued its statement as major banks and building societies taking part in the programme such as RBS, NatWest and Halifax began to issue details of the mortgage they will offer.
RBS and NatWest will both offer fixed-rate deals priced at 4.99% for two years or 5.49% for five years.
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