Osborne asks Bank of England to keep closer eye on housing scheme

LONDON Fri Sep 27, 2013 12:08am BST

Members of the public walk past the Bank of England in central London June 3, 2008. REUTERS/Alessia Pierdomenico

Members of the public walk past the Bank of England in central London June 3, 2008.

Credit: Reuters/Alessia Pierdomenico

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LONDON (Reuters) - Chancellor George Osborne has asked the Bank of England to play a bigger role in ensuring that his controversial "Help to Buy" housing programme does not cause a new property boom.

The BoE's Financial Policy Committee will make annual assessments of the plan, starting next September, the Treasury and the central bank said on Thursday.

The committee had been due to advise on the suitability of extending Help to Buy only after its first three years of operation.

The FPC will also advise whether a price cap for properties covered by the programme and fees charged to lenders are appropriate.

Help to Buy was originally launched to help buyers of new properties and a second, potentially much bigger phase is due to begin in January. It will assist buyers who might otherwise be unable to afford a down payment on a home. Up to 12 billion pounds ($19.20 billion) of government guarantees could spur as much as 130 billion pounds of new mortgages.

Since the second stage of the plan was announced in March, Britain's housing market has shown signs of recovery, especially in London, where prices have jumped by about 10 percent from 12 months ago.

Critics of the scheme have said it risks fuelling an unsustainable rise in house prices. Britain's Business Minister Vince Cable has expressed his concerns about the programme.

Properties worth up to 600,000 pounds would be eligible for the Help to Buy as announced in March. Some critics have said that lowering the ceiling would help lessen the programme's impact on properties in London where prices are highest.

Earlier this week, the FPC said it would be vigilant about risks from coming from the housing sector but said it saw no danger signs for the time being.

(Writing by William Schomberg; Editing by Stacey Joyce and Cynthia Osterman)

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