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King issues warning on Help to Buy scheme

King issues warning on Help to Buy scheme

Category: Mortgages

Updated: 20/05/2013
First Published: 20/05/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Governor of the Bank of England, Sir Mervyn King, has claimed there is "no place in the long run" for the Government's Help to Buy scheme.

Speaking during a television appearance last weekend, Sir Mervyn said the scheme, due to be launched on 1 January next year, must not be viewed as a permanent 'fix' to problems in the mortgage and housing market.

Part of the Government's drive to boost the UK's housing market, the Help to Buy scheme will assist borrowers with just a 5% deposit with buying a home. An additional 20% of the property value can be borrowed from the Government interest-free for the first five years.

The Governor's comments follow reports of increased levels of activity from mortgage borrowers, especially those purchasing their first home.

Statistics released by the Council of Mortgage Lenders (CML) last week found gross mortgage lending in the first-time buyer sector had risen during March by 20%, with the value of approved home loans totalling £2.4 billion.

"This scheme is a little too close for comfort to a general scheme to guarantee mortgages," he said. "We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market.

"We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position," he warned.

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