Chancellor George Osborne reportedly rowing back on mortgage guarantee programme

Alastair Stewart

There’s nothing worse than a “told you so”, but most commentators (including Your’s Truly) can issue a hearty “told you so” to chancellor George Osborne, who is reportedly considering clipping the wings of Help to Buy before the housing support package becomes too much of a pterodactyl.

According to the FT - and the inevitable Robert Peston, intoning as I tap - the chancellor is to give the Bank of England emergency powers to restrict the controversial scheme which allows would-be homeowners to buy with only a 5% deposit if there are signs it is creating a housing boom.

Perhaps Osborne was given an early peek at this morning’s Nationwide stats. UK house prices increased by 0.9% in September and were 5% higher than September 2012, an accelerating trend. All UK regions saw annual price rises in the third quarter and London reached 10%. And that is before the imminent and more contentious second phase of H2B, covering all housing, as opposed to purely newly built homes.

Fear and greed - the two greatest dynamics in the housing market - are already hard at work

Possible restrictions could include lowering the £600k ceiling or raising the fees the government charges banks for effectively insuring the not-inconsiderable risks that it will take on the public balance sheet.

Almost everyone, from the International Monetary Fund to Mr Patel, my newsagent, predicted from the earliest days of H2B that it would stoke house price inflation. A few siren voices from the research community have recently argued that price rises are a) London-centric b) stoked by shadowy foreign buyers, c) hardly affected by H2B1, since new homes are only about 10% of the overall market and d) unlikely to cause a banking crisis.

But they may be missing a huge point. Buyers fearing an even greater spurt to prices when H2B2 kicks in on 1 January will be prepared to stump up more in advance of this. And greedy sellers, quite mindful of this, will happily bump up their asking prices. Fear and greed - the two greatest dynamics in the housing market - are already hard at work. Thanks to Mr Osborne.

Alastair Stewart is construction and property analyst at Progressive Research. Follow him on Twitter @BuildInsight