Help to Buy scheme may have 'unintended consequences', says report

In a report on the Budget 2013 (132-page / 1MB PDF), the committee said that any decision to continue with the scheme should probably be made by the Government on the basis of advice from the Bank of England's financial planning committee.

The committee said in the report that the mortgage guarantee part of the scheme would provide taxpayer compensation for the mortgage lender for a portion of losses suffered in the event of repossession of a home. It said that the appropriateness of this needed "careful scrutiny".

"The Chancellor says that expected losses under the scheme will be covered by the commercial fee charged to participating lenders. No details of the proposed level of the fee nor how it will be structured in practice are yet available. Nor has a date been given," the report said.

The committee also noted that the guarantee scheme makes the Government an "active player" in the mortgage market. It said that it was concerned that the Treasury now "has a financial interest in maintaining house prices to limit losses to the taxpayer".

The committee said that the temporary nature of the scheme, which will run for three years, reflects the Government's view that the "current scarcity of high loan-to-value lending" is a cyclical issue rather than a "symptom of longer term structural change". However, it said that the Government had provided "little analysis" to support this.

The committee said it was concerned that the Government could face "immense" pressure to extend the scheme in three years. "The unintended and unwelcome outcome could well be that a scheme designed to deal with a supposedly temporary problem in the UK housing market becomes a permanent feature of the UK housing market," the report said.

The committee raised a number of questions about the scheme which it said it "expects the Government to answer", including what the Government estimates the effect of the scheme will be on house prices in three years.