The Bank of England gave a clean bill of health to Britain’s controversial flagship mortgage guarantee scheme on Thursday, sparing the government from potential embarrassment in the run-up to a national election.
The central bank also formally asked to expand its arsenal of powers to curb mortgage lending for homes and buy-to-let properties, and said it was bringing forward the date when it would put a figure on the maximum leverage banks can have.
Prime Minister David Cameron announced the Help to Buy mortgage guarantee scheme at his Conservative Party’s annual conference last year, saying it would aid home-buyers who could afford mortgage repayments but lacked a large deposit.
The plan was widely criticised by opposition politicians and many private-sector economists for risking pushing up house prices, which have since risen by around 10 percent.
However the BoE said Help to Buy was not to blame, as it only accounted for around 5 percent of mortgages and was most used in regions where house prices had risen least.
“The scheme does not appear to have been a material driver of (house price) growth – for example, take-up of the scheme has been weak in London where house price growth has been strongest,” the central bank’s Financial Policy Committee said.
Mortgage lending standards had not deteriorated since the launch of Help to Buy, and house prices appeared to be cooling sooner than the FPC had expected when it last met in June and imposed caps on general mortgage lending.