The outgoing governor of the Bank of England cautioned the government that the UK must avoid emulating the US where state-backed mortgage schemes had to be bailed out.
Speaking to Sky News’ Murnaghan programme King said: “I'm sure that there is no place in the long run for a scheme of this kind.
"This scheme is a little too close for comfort to a general scheme to guarantee mortgages.
“We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis and we need to get back to that healthy mortgage market.
"We do not want what the United States have, which is a government-guaranteed mortgage market - and they are desperately trying to find a way out of that position."
He added: "So, we mustn't let this scheme turn into a permanent scheme. The right time to terminate it will depend on economic conditions at the time."
In April the Treasury Select Committee warned the government that it would come under "immense" pressure to extend the scheme in three years' time.
But Treasury Minister Danny Alexander told the BBC that the scheme was never intended to be permanent.
"We've been very explicit that this scheme is limited to three years," he said. But if it was extended, "we want the Bank of England's new financial policy committee to take a view on this scheme before it's extended."
