Help to Buy has not inflated house prices, says Bank of England

Governor of the Bank of England Mark Carney has written to George Osborne about the Help to Buy mortgage guarantee scheme.

This is the part of the 95% mortgage scheme that is available on both second-hand and new housing stock. It is distinct from the shared equity part of the scheme which is available on new homes only.

Carney has concluded that the scheme is not inflating house prices or encouraging a return to riskier lending.

Carney said that although the scheme has led to a return of lenders to above 90% loan to value mortgages, volumes of lending “remain small relative to experience before the financial crisis”.

He goes on: “Looking ahead, and based on the uptake of the scheme so far, we expect the volume of HTB loans to grow, but to become only a modest proportion of lenders’ mortgage books over the life of the scheme.

“Going forward, the risk of lenders extending loans under the scheme that stretch borrowers’ affordability is curtailed both because Help to Buy loans are covered by the Mortgage Market Review and your decision to cap loans in the scheme at 4.5 times income.”