Business

Vince Cable warns Help to Buy could create new 'bubble'

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Media captionBusiness Secretary Vince Cable fears the impact of government policies on the housing market

A flagship government scheme to revive the housing market could inflate it, Business Secretary Vince Cable warns.

The Help to Buy scheme provides equity loans of up to 20% for buyers of new-build homes in England and will start part-guaranteeing mortgages for buyers across the UK from next year.

"I am worried of the danger of getting into another housing bubble," Mr Cable told the BBC's Andrew Marr Show.

But another minister said the scheme would be designed not to raise prices.

The Treasury's infrastructure minister Lord Deighton told BBC Radio 5 live that it was an "ingenious scheme", adding that it "would be properly designed to avoid any risk of stimulus being converted into price rises".

"Given the current situation with the economy I think we're a long, long way from having any bubble."

Help to Buy has been credited with boosting first-time buyers this year.

But some have warned the government is interfering too much.

The first phase of the scheme was launched this year. From January, Help to Buy will be extended to help buyers of existing homes throughout the UK.

Mr Cable said: "The Help to Buy scheme is actually quite complex. We have one part that's already operating, which is providing mortgages against new homes, nobody has questioned that.

"The proposal which hasn't yet been implemented, which is providing a guarantee for a limited range of mortgages, could be a problem. It could inflate the market.

"But, if it's properly designed it could be a useful addition."

The second part of the scheme will allow people to buy with just a 5% deposit, with the government undertaking to act as guarantor for a mortgage for a further 20% of the value in the hope of giving banks greater confidence to lend.

Buyers of properties costing up to £600,000 will be eligible for the assistance.

But foreign buyers with no history of property ownership in the UK, buyers of second homes and buy-to-let landlords will be excluded, Chancellor George Osborne has said.

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