Construction bosses have warned that the industry needs “stability” to deal with the UK’s housing shortage after Bank of England governor Mark Carney hinted that he may be prepared to rein in stimulus measures to head off a property price bubble.
Carney yesterday said that the booming housing market represents the “biggest risk” to the UK’s economic recovery. He also expressed concerns that buyers could be taking on too much debt and said the central bank was watching to make sure banks had enough capital to withstand the risks involved.
In a television interview, he said: “We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice – the Chancellor has asked us if we would provide advice on changing the terms of Help to Buy. All those things are possibilities and we will consider them all.”
In March, George Osborne said he was extending the Help to Buy scheme until the end of the decade, making an extra £6 billion available for interest-free loans worth up to 20 per cent of the value of a £600,000 new-build property in England. A similar scheme operating in Scotland covers homes with a maximum value of £400,000.
Housebuilder Persimmon recently told investors that it has sold more than 5,000 new homes to customers using mortgages associated with the taxpayer-backed initiative.
Responding to Carney’s intervention, Homes for Scotland chief executive Philip Hogg told The Scotsman: “As we’ve been highlighting for more than a decade, the only way to effectively impact house price inflation is to significantly increase housing supply.
“Recognising this, in 2007 the Scottish Government set a target of 35,000 new homes to built each year by 2015. In 2012, the figure was less than 15,000.”
Deputy First Minister Nicola Sturgeon announced on Friday that a further £40 million is to be ploughed into the Scottish shared equity version of Help to Buy, taking the total it has received to £275m.
Home Builders Federation executive chairman Stewart Baseley said: “We have an acute shortage of housing that has developed over decades and is going to take time to address. After years of the lowest rate on record, house building is now increasing very rapidly. To maintain and sustain these increases, housebuilders need stability.”
He added: “The Help to Buy equity loan scheme has supported demand for new-build homes and its extension provides certainty about longer-term demand. This is providing desperately needed homes and also creating jobs on sites across the country and in the supply chain.”
Carney also said the Bank could take steps to test whether homebuyers would be able to afford mortgages at “much higher interest rates”, but the “deep, deep structural problems” in the property market – with demand far outstripping supply – could only be tackled through a major expansion of housing stock.
Deputy Prime Minister Nick Clegg said in a TV interview yesterday: “I think if [Carney] says that we need to pare back some of the government schemes, like Help to Buy, then I think we should do so.
“He’s certainly right when he says the big long-term problem is we simply don’t build enough homes in this country. We haven’t done so for years. We’re making progress now, but we need to do much more in the future.”