September 29, 2014 / 3:58 PM / 5 years ago

Bank of England to give verdict on government home loan scheme on October 2

Pedestrians walk past the Bank of England in the City of London May 15, 2014. REUTERS/Luke MacGregor

LONDON (Reuters) - The Bank of England said on Tuesday it would publish its verdict on the government’s Help to Buy mortgage guarantee scheme on Oct. 2 and say whether it needs new powers to control the housing market.

The Help to Buy mortgage scheme was launched last October after being announced as a flagship measure at the ruling Conservative Party’s annual conference. It offers government guarantees to high loan-to-value mortgages on properties worth up to 600,000 pounds.

Many private-sector economists criticised the scheme when it was launched because it risked further fuelling Britain’s rapidly rising house prices, and the government asked the BoE to advise on whether the scheme should be modified after a year.

Although British house prices have risen sharply since the scheme’s launch, it only accounts for a small fraction of mortgages issued. BoE policymakers have said previously that the scheme did not appear to be driving a house price bubble.

The Bank of England also said it would respond on Thursday to a request from Chancellor George Osborne to say whether it needed new powers to regulate Britain’s housing market.

In June the BoE recommended that no more than 15 percent of mortgages should be greater than 4.5 times a borrower’s income, shortly after Osborne said he would be willing to give the BoE legal powers to enforce this type of measure.

Reporting by David Milliken; Editing by Hugh Lawson

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