The chief executive of taxpayer-backed Lloyds bank has warned that the Help to Buy scheme risks creating a house price bubble unless planning laws are relaxed to pave the way for more housebuilding.
Antonio Horta-Osorio also called for more lower-cost “social housing” so that rising mortgage approvals did not send house prices soaring again.
His bank, which also includes Halifax, Britain’s biggest mortgage lender, is a lender under Help to Buy – extended recently to include a government guarantee on high-risk mortgages, allowing people to buy a home with a deposit of just 5 per cent.
However, Horta-Osorio said: “It is important that planning permits, building authorisations and social housing projects are (liberalised) so that the increase in (mortgage) transactions does not lead to a substantial increase in house prices.”
He said the initiative needed “tweaking” to avoid overheating the market in the south-east of England, in particular. “The scheme should be focused outside London and the south-east. (In the rest of the country) you have nothing close to a housing bubble,” he said.
Horta-Osorio is the latest high-profile voice to highlight concerns over the scheme, following warnings from former Bank of England governor Sir Mervyn King in recent months and the International Monetary Fund last week. Recent official figures showed mortgage approvals running at a five-and-a-half-year high in August, while data from Nationwide showed house prices rose at their fastest annual pace in more than three years in September.
Lenders including Royal Bank of Scotland and its NatWest arm have started offering mortgages under the scheme, while Aldermore, Barclays, HSBC, Santander and Virgin Money also plan to join them.