Osborne could finally be seeing sense over Help to Buy
Analysts have welcomed reports that Osborne's Help to Buy mortgage backing scheme could be watered down, as data this morning shows house prices hitting a 2008 high.
It was reported in Morning Wire today that the programme's upper limit – providing mortgage support for homes worth as much as £600,000 could be reduced on recommendation by the financial policy committee (FPC).
The FPC will also be able to propose an increase in the fees charged by the government if it feels the market is out of control.
Rob Wood, chief UK economist, Berenberg:
The housing recovery is not just a result rocketing London prices, so considered in isolation this change looks like closing the stable door after the horse has bolted. The scheme cannot be reviewed until next September and reducing the £600k cap is unlikely to be a big deal for the bulk of the country outside London. Even then it might make little difference given that many lenders have lower self-imposed caps for risky mortgages anyway. Changing the price could be important, but the FPC has said it will take a “graduated approach” on the housing market, so they seem unlikely to change the fees substantially and soon.
If this change of heart is an indicator of the direction policy is heading then it could be significant. The full details of this mortgage guarantee scheme have not been finalised yet, most significantly the fees the government will charge. They could be set high enough that the scheme has little effect. That would be sensible in our view. The housing market would still be boosted by improving mortgage availability and very low interest rates, but some of the worst upside risks would be removed. While politics may prevent a full cancellation of the scheme, fully implementing it would not be a risk worth taking.