Governor Carney has explained the Bank has no power of veto over the Help to Buy scheme and announced that it will be withdrawing the Funding for Lending Scheme for mortgage lending from January 2014.
With respect to the Help to Buy scheme there is no exit strategy for the taxpayer; indeed there is no strategy at all. Once the government is entrenched in the day-to-day operations of the mortgage market it is not clear how it will ever get out. We will be right back where we started, only more in debt.
It seems Mark Carney is refusing to play this short-term political game and is instead putting the long-term interests of the country first.
It would be much better if the stakeholders, including the Treasury and the Department of Communities and Local Government, worked together. But if they can’t or won’t then we now know the Bank of England will act alone.
Personally, I would have stopped Funding for Lending from being used for buy-to-let but kept it going for consumer mortgages, particularly first-time buyers.
I would also ask the lenders to consider what effects the Department of Work and Pensions withdrawing around £23.8bn in housing benefits from the private rental sector over the next five years will have on arrears levels.
Without property price inflation new buy-to-let landlords barely break even and if mortgage availability and rates deteriorated this might cause some to vacate the sector, resolving the supply problems for first-time buyers using the Help to Buy scheme, without causing a property price bubble.
But this would require strategic collaboration which brings us back to the Bank of England having to take the robust unilateral action it now is. I think we should look elsewhere for those responsible for a lack of overall leadership.
