The opposition Labour Party called for the Bank of England to “urgently” review the U.K. government’s Help to Buy program, which it says is fueling a house-price boom.
The plan, which allows people to buy homes worth up to 600,000 pounds ($970,000) with a 5 percent deposit, risks making home ownership even less affordable than it already is, Labour’s Treasury spokesman Ed Balls wrote in an article for the PoliticsHome website, published today.
Revenue from a property-transaction levy helped to narrow the budget deficit in September, while recent reports show house prices are back above their early-2008 peak. To address criticism of risks posed by Help to Buy, Chancellor of the Exchequer George Osborne has tasked the central bank’s Financial Policy Committee with reviewing the program annually starting next September.
“By simply boosting demand with Help to Buy while failing to take action to boost housing supply, George Osborne risks making home ownership even further out of reach of the aspiring first-time buyers the scheme should be helping,” Balls wrote. “It is why I believe the Bank of England must now urgently review the details of the Help to Buy scheme.”
U.K. house prices rose to an all-time high in August, having climbed 18 percent since March 2009, according to the Office for National Statistics. In London, values have surged 43 percent to an average 437,000 pounds -- almost double the national average. Asking prices in the U.K. capital jumped more than 10 percent this month, Rightmove Plc said Oct. 21.
The increase in tax income last month was the most for a September since 2010, the statistics office said on Oct. 22. Stamp duty on property purchases grew 254 million pounds compared with a year earlier.
Help to Buy has drawn warnings from the International Monetary Fund, U.K. Business Secretary Vince Cable and lawmakers. The BOE says it remains vigilant, though Markets Director Paul Fisher said this month he doesn’t see a bubble.
The first phase of Help to Buy, interest-free loans for buyers of newly built homes, began in April. The second phase, which extends government guarantees to all homes, was brought forward to this month from January.
“What we urgently need now is action to secure a strong, balanced and sustainable recovery and long-term reforms to earn and grow our way to higher living standards -- catching up all the lost ground and delivering for the many, not just a few at the top,” Balls said.