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Govt may ‘pare back’ Help to Buy after Carney’s warning

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19/05/2014
The government may "pare back" its Help to Buy scheme if the Bank of England (BoE) believes it threatens the UK's economic recovery, Nick Clegg has said.
Govt may ‘pare back’ Help to Buy after Carney’s warning

The deputy prime minister suggested the government would act if the Bank recommended altering or removing the scheme, which launched last year with the aim of increasing access to mortgages, particularly for first-time buyers.

It followed comments from BoE governor Mark Carney, who said the housing market has “deep, deep structural problems”, with a shortage of new homes and increased demand driving up prices.

Speaking on The Andrew Marr Show, Clegg said: “I think if he [Carney] says that we need to pare back on some of the government schemes like Help to Buy, then I think we should do so.

“And he’s certainly right when he says of course the big long-term problem is we simply don’t build enough homes in this country. We haven’t done so for years, we’re making progress now, but we need to do much more in the future.”

In an earlier interview given to Sky News, Bank governor Carney suggested the housing market posed the biggest risk to Britain’s economic recovery.

UK house prices have increased by as much as 10% in the 12 months to April, spurred by record-low interest rates and government schemes to assist home buyers, such as Help to Buy.

“When we look at domestic risk the biggest risk to financial stability, and therefore to the durability of the expansion, those risks centre on the housing market and that’s why we are focussed on that,” Carney said.

One of the dangers of Help to Buy, he added, was that it could “change attitudes” about mortgage lending. He said the Bank would be concerned if there were a rapid increase in high loan-to-value mortgages and, particularly, if they were accompanied by high loan-to-income ratios. “We’ve seen that creeping up”, he said.

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