A government source has told the Daily Mail that the government’s Help to Buy scheme may be “scaled back” to prevent the property market from overheating.
The Help to Buy scheme is due to be reviewed by the Bank of England in September – the Bank has already said that the upper limit of the scheme should be reduced from £600,000 to a lower limit, or even half.
This means that buyers purchasing a home under the scheme would most likely not be able to buy in areas where property prices often exceed £300,000, such as London.
The government guarantees 15% of a mortgage under the scheme with buyers putting down a 5% deposit – but some critics have expressed concern that the upper limit of £600,000 is too generous and might encourage homebuyers to take on mortgages well above the amount they can afford to repay.
Any increase in mortgage interest rates could mean first-time buyers get into debt and financial difficulties if they are unable to meet any increase in their mortgage repayments.
Business Secretary Vince Cable has suggested that the Help to Buy scheme has fuelled escalating property prices across the UK as a result of the government setting a generous upper limit for the value of property bought under the scheme.
In London, house prices have risen by as much as 18%, with a 9.5% average increase in house prices across the UK.
Chancellor George Osborne may announce a scaling back of the Help to Buy scheme in a speech he will make at London’s Mansion House in June.
Some high street lenders have previously called for an exit date for the Help to Buy scheme.
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