The global financial organisation, which published its views on the UK economy this morning, suggested economic activity appeared to be improving but recovery would be slow.
It said Help to Buy was aimed at boosting activity in the housing market: “This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing.
“To mitigate this risk and engineer a supply response, the government should consider fiscal disincentives for holding land without development.”
And while the IMF singled out Funding for Lending for praise, it suggested the cheap funds for lenders were not necessarily being passed on to borrowers. Instead, the UK’s banks needed to fix their balance sheets if lending was to continue at a durable pace.
It called for a clearer strategy regarding returning bailed-out banks RBS and Lloyds Banking Group to private ownership: “Any strategy should seek to return the banks to private hands in a way that maximizes the value for taxpayers, strengthens confidence and competition in the sector, and minimizes outward spillovers.”
The Council of Mortgage Lenders is the latest financial services industry voice to question the lack of a Help to Buy exist strategy.
Meanwhile, the Bank of England’s latest Monetary Policy Committee minutes showed Funding for Lending brought down mortgage interest rates by less than expected.
Manse & Garret Property Search managing director Karelia Scott-Daniels said: “The IMF has expressed the concern, held by many others, that the Help to Buy Scheme could backfire in dramatic fashion.
“There’s no doubt that the Government’s solution for the property market could, over time, prove to be the problem.
“Weak supply will naturally accentuate the situation. The weaker supply is, the higher prices could rise, preventing even more people from getting on the ladder.”
