George Osborne defends Help to Buy scheme in face of criticism and Bank's pressure to obtain power to impose 'loan-to-value' limits
The Chancellor is refusing to make concessions on the Help to Buy mortgage guarantee scheme in the face of sharp criticism from the International Monetary Fund, opposition politicians and some City economists.
‘It is good news that Barclays has now signed up,’ George Osborne told a news conference at the International Monetary Fund.
‘All the major mortgage lenders have now signed up,’ he added.
Criticism: George Osborne at the start of the annual IMF and World Bank fall meetings in Washington
Nationwide is the only leading provider still holding out. In a wide ranging press conference Osborne also announced that he would unveil his Autumn statement on December 4.
He made it clear, however, that there would be no tax giveaway.
‘Britain still continues to have some very serious public finance challenges that need to be addressed,’ he said.
His defence of the scheme came despite growing pressure for the Government to relent and give the Bank of England’s Financial Policy Committee the power to impose ‘loan-to-value’ limits on lenders in order to avert the prospect of a mortgage lending and credit bubble of the kind that afflicted the UK economy in the run up to the crisis of 2007-08.
Osborne said that Help to Buy ‘seeks to address the serious problem of lack of loan finance for high loan to value borrowers’.
Pressure: The Bank of England's Financial Policy Committee has asked the power to impose 'loan-to-value' limits on lenders in order to avert the prospect of another mortgage lending and credit bubble
Officials travelling with the Chancellor point out that in the 1980s and 1990s the average mortgage for first time buyers was 95 per cent. In the period 1990-1994 some 15 per cent of high loan to value loans were for first time buyers, a figure that has dropped to just 2 per cent a decade ladder.
The Chancellor said his goal was to make sure housing is ‘affordable for people who cannot get on the ladder’.
It was his intention to bring home ownership within the reach of those who don’t have the means to get direct assistance or guarantees from their parents and families.
In response to demands that the Treasury introduce tougher loan-to-value rules, Osborne was adamant that the Financial Policy Committee had ‘not asked for powers for loan-to-value’.
If the FPC should ask for additional powers there was a ‘procedure’ under which they could be requested by the Treasury.
The Chancellor claimed that the Bank had not ‘previously asked for such powers’, although it is understood that the previous governor Lord King may have cooled on the idea of making such a request because the Bank had received indications that it would not be granted.
Osborne showed no signs of being willing to back down on the mortgage subsidy part of the scheme at this early stage.
‘It is not an exotic weapon of financial destruction,’ the Chancellor insisted.
Turning his guns on his Labour predecessor Alistair Darling he said that the former Chancellor ‘was opposed to giving the Financial Policy Committee more powers. He was wrong’.
The Autumn statement will provide the first glimpse of whether the Office for Budget Responsibility, that was among the most gloomy of economic forecasters in the spring, is ready to update the official forecast for growth.
The IMF has just doubled its UK forecast to 1.4 per cent in 2013 and 1.9 per cent next year. A higher growth forecast would also allow the OBR to lower its forecasts for the public finances. The higher the growth forecast the bigger the tax revenues and the smaller the bill for unemployment and welfare payments.
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