Speaking at the Barnett Waddingham pensions conference in London, Lamont said he agreed with the government’s intervention but feared borrowers would use the scheme to take on more debt than they could afford in the long-term.
“My concern is that Help to Buy may encourage people with 95% mortgages to gear up too much. Banks have to make the commercial judgement,” he said.
“In a few years when rates rise, after 2016 according to the Bank of England, it is important that new buyers are able to continue to service their mortgages.”
Lamont added there was no sign of excessive housing inflation yet but the government and wider industry should be vigilant against such risks, particularly in the London market.
“There is no housing bubble at present, but there will always be a danger of one developing and it is in no-one’s interest that houses should become more unaffordable. The housing situation certainly needs to be watched closely for any signs of a bubble emerging, to prevent any future misery for property buyers.”
Later in his speech Lamont said the end of quantitative easing (QE) would be the next major problem the world economy faces.
“We have had five years of QE. If it hasn’t created sufficient increases in demand by now, is it ever going to do so? Growth in the United States by historic standards is still anaemic. What QE has done is put up asset prices with all sorts of distorting effects: bonds, high yielding shares, commodities, emerging markets and arguably house prices in certain parts of the UK.
“While QE was undoubtedly necessary in the early part of the crisis, it cannot go on forever.”
