The IMF praised Help to Buy for enabling creditworthy lower-income households to purchase homes, especially outside London and the Southeast, and said the program has also played a role in unlocking mortgage credit for lower-income borrowers from other sources. However it warned that if these flows increase significantly, the FPC and the Treasury may wish to consider whether the scheme should be modified or even ended to prevent it becoming a financial risk.
She warned that the government must continue to work to overcome the housing problem in the UK with further reform.
Lagarde said:
"Imbalances in the housing market should be addressed through supply-side remedies. Fundamentally, house prices are rising because demand outstrips supply. The UK has a secular problem with inadequate housing supply, associated with planning restrictions and compounded by depressed housing starts since the financial crisis. Macroprudential and monetary policies can only be temporary palliatives to an underlying problem.
"New initiatives to spur house building are welcome, but political consensus for further reform is needed. The government has introduced major changes to the planning system to create incentives for local councils to increase available land for housing development, and there are some signs of recovery in housing construction. Nonetheless, key inefficiencies remain. These include: unnecessary constraints on brownfield and greenfield developments; tax policies that discourage the most economically-efficient use of property; and underdeveloped rental markets with relatively short lease terms."
