Lloyds boss warns Help to Buy scheme will start housing bubble

Antonio Horta-Osorio
Antonio Horta-Osorio

The boss of state-backed lender Lloyds has warned that the Government’s Help to Buy scheme risks creating a dangerous house price bubble unless it is matched with a boost in housebuilding.

In the latest high-profile warning over the scheme, Antonio Horta-Osorio called for relaxed planning and building rules and more social housing projects so that rising mortgage approvals do not drive up house prices.

The Halifax owner is a major lender under Help to Buy, which was recently extended to include a Government guarantee on high-risk mortgages, allowing people to buy a home with a deposit of just 5%.

In an interview with the Financial Times, Mr Horta-Osorio said: “It is important that planning permits, building authorisations and social housing projects are (liberalised) so that the increase in (mortgage) transactions does not lead to a substantial increase in house prices.”

Lloyds’ chief executive said the initiative needs “tweaking” to avoid overheating the market in the south east of England.

He said: “The scheme should be focused outside London and the South East. (In the rest of the country) you have nothing close to a housing bubble.”

The warning came as the boss of Britain’s bad bank said Help to Buy could speed up the repayment of its £42 billion taxpayer loan by lifting house prices.

Richard Banks, who runs UK Asset Resolution, which manages the loans of failed lenders Northern Rock and Bradford & Bingley, said this could help lift customers out of negative equity - where loans exceed the value of their homes.

In an interview with the Times, he said: “If house prices go up outside London, it is a good thing for us as quite a few of our customers are trapped by their high loan-to-values.

“If higher house prices mean sufficient customers are able to and choose to remortgage with another mortgage provider, it may facilitate UKAR being able to pay off the Government loan more quickly.”

Mr Horta-Osorio is the latest high-profile voice to highlight concerns over the scheme, following warnings from former Bank of England governor Sir Mervyn King and the International Monetary Fund.

Recent official figures showed mortgage approvals running at a five-and-a-half-year high in August, while data from Nationwide showed house prices rose at their fastest annual pace in more than three years in September as the market revival spread across the UK.