Bank to supervise housing plans

Shares in housebuilders have fallen after the Treasury announced its review of the Help to Buy scheme.

Persimmon was the top faller in the FTSE 100 index, down four per cent, while the other such as Bovis Homes, Bellway and Barratt Developments also suffered - as well as estate agency Countrywide.

The scheme offering loans and mortgage guarantees to help householders on the property ladder has previously buoyed profits at builders and other firms closely linked to the property market.

Shadow Chancellor Ed Balls has said the government should review the Help to Buy scheme now, rather than annually.

He said: "It's totally ill-thought through for George Osborne to decide that a scheme which should be about helping first time buyers will allow taxpayer backed mortgages for homes worth up to £600,000.

"And George Osborne is still failing to address the fundamental problem of the lowest level of house building since the 1920s.

"You can't deal with the cost of living crisis without building more homes."

The Council of Mortgage Lenders has welcomed plans announced by Chancellor George Osborne that there will be a regular review of the Help to Buy mortgage guarantee scheme.

House prices rose at their fastest annual pace in more than three years in September as the market revival spread across the UK, Nationwide has reported.

For the first time since 2007, all 13 UK regions have seen annual house price growth, in signs that "the pick-up is becoming increasingly broad-based", the building society said.

The annual rate of house price increases rose to five per cent across the country, marking the strongest rise seen since July 2010.

Prices are also up by 0.9 per cent month-on-month, following a 0.7 per cent monthly increase seen in August, meaning the typical UK home is now worth £172,127.

Bank of England Governor Mark Carney has said the housing market has seen a turnaround, although he has urged caution over the speed of the improvement.

In an interview with the Yorkshire Post, he said the Bank should remain "vigilant" as levels of activity on the property sector are only at two-thirds of the rate compared to longer-term figures for the sector.

He said: "The core of the recovery is not housing, but that said, the prospects and level of activity in housing have turned from low bases and we as the Bank of England need to be vigilant about how those dynamics move in the future.”

**Read more: Bank of England to keep close check on housing scheme

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Chancellor George Osborne has asked the Bank on England to take a bigger role in ensuring his Help to Buy housing scheme does not create a housing bubble.

The 'Help to Buy' scheme is available to first-time buyers and existing homeowners on properties worth up to £600,000.

How does it work?

• The first stage of Help to Buy, offering loans to buy a new-build home with a deposit of just 5%, launched in April
• Government loans up to 20% of property value, interest-free for five years, to boost a buyer's deposit
• Scheme credited with spurring a surge in home sales and driving up prices

• The second stage of the scheme, 'mortgage guarantees', is due to launch in January
• Will see state take on risk of default by borrowers by guaranteeing proportion of loan
• Scheme aims to boost mortgage availability by reducing risk for lenders
• Will be extended to existing homes, not just new-builds

• Criticisms include risk of creating housing bubble and piling huge housing risk on Government
• Pete Redfern, boss of Taylor Wimpey, said scheme could be a "hazard to the economy" unless a clear exit plan is laid out
• Former Bank of England governor Lord King warned scheme is "too close for comfort"

George Osborne is to give the Bank of England an emergency brake on the government's Help to Buy scheme, enabling it to intervene if there are signs it is creating a housing boom.

The Bank's Financial Policy Committee (FPC) will make annual reviews of the scheme, starting next September.

The committee had been due to make an assessment of Help to Buy only after its first three years of operation.

Read more: Cable cautious over recovery

ITV News' economic editor Richard Edgar's blog: There is a new deputy sheriff in town