Treasury Committee expresses concern over Help to Buy measures

The Treasury Committee today released its report on the 2014 Budget, noting that while housing bubbles are 'easy to spot in retrospect', taking action in advance is needed to mitigate their negative effects on financial stability.

Related topics:  Mortgages
Amy Loddington
9th May 2014
Mortgages

Chairman of the Committee, Andrew Tyrie MP, said that attention had been brought to the potential dangers of a housing bubble caused by the Help to Buy schemes, and that the Financial Policy Committee would meet next month to decide what measures would need to be taken.

The report also notes that wider economic concerns are the responsibility of the Government and the Monetary Policy Committee. The Government is also responsible for fiscal and policy tools which directly influence the housing market. It should therefore state what indicators it believes are most important in detecting any wider economic risks arising from the housing market. It should also set out how it plans to address these risks, should they arise.

Chairman of the Treasury Committee, Andrew Tyrie MP, said:

“The Committee has expressed concerns about Help to Buy from the time of its announcement at last year’s Budget. The Committee highlighted the risk that the primary effect of the scheme, at least in the short-to-medium term, could be to raise house prices. The Committee has also drawn attention to the risk that withdrawal of Help to Buy may have a distorting effect on the housing market.

“The need to address these difficulties places a particular responsibility on the FPC, as well as the Government, for detecting and addressing the financial stability risks arising from the housing market.

“Housing bubbles are easy to spot in retrospect. The FPC has been given the challenging role of identifying them in advance.

“The Bank of England has been granted a large and varied range of tools to address this type of risk to stability. The FPC will be meeting in June to decide whether any of them should be used. The Committee will take an early opportunity to secure an explanation, both to us and to the wider public, for any decisions taken.

“The FPC and the Bank’s legitimacy can only be enhanced by a wider public understanding of their powers and decisions.”

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