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First-time Buyers

Treasury Select Committee calls for Help to Buy exit strategy

Adam Williams
Written By:
Adam Williams
Posted:
Updated:
10/03/2014

A Treasury Select Committee inquiry into the autumn statement has again warned of the

The committee’s report on Chancellor George Osborne’s (pictured) autumn statement was published ahead of the Budget later this month.

It repeated its assessment that the Help to Buy scheme could have ‘negative distorting effects’ on the housing market, first made after the scheme was unveiled by the government last spring.

The committee said the scheme may also pose problems when it reaches the end of its three-year life, unless a satisfactory exit strategy can be put in place.

“The treasury should examine the impact of an abrupt end to this scheme, and act in advance to mitigate market distortions before they arise,” its report said.

“The government should explain now what the exit strategy from Help to Buy mortgage guarantee will be in order better to influence expectations.”

The committee later said the Bank of England may need to alter the timing of its annual review into the scheme to help with exit plans.

Chair Andrew Tyrie said: “The Committee remains concerned about the impact of the government’s Help to Buy mortgage guarantee scheme.

“An abrupt end to the scheme could distort the market, as could announcements which radically alter people’s expectations. The sooner that we have clarity about the terms for exit, the better.”

The committee also commented on a ‘rapid’ rise in house prices. It said the availability and demand for mortgages has quickly increased, sparking speculation the UK is facing another housing bubble.

“The danger is that it will be difficult for the Financial Policy Committee to identify when a speculative housing bubble may have begun,” it said.

“Such a bubble, driven by increasing lending to households, would be a risk to the UK economy.”

It said policy makers must afford this area careful attention with Bank of England governor Mark Carney stating sharp rises in asset prices posed the ‘greatest medium-term risk to the economy’.


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