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IMF joins warnings of Help to Buy house price rises

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The International Monetary Fund has hit out at the Government’s Help to Buy scheme, claiming it will simply push up house prices.

In its assessment of the UK economy, published today, the IMF echoed a series of warnings about the risks of the scheme from influential bodies such as the Office for Budget Responsibility, Treasury select committee and Bank of England governor Sir Mervyn King.

The IMF wants to see more homes built alongside Help to Buy and called for the tax system to provide greater incentives to build.

It states: “Help to Buy 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.”

The IMF also called for the Royal Bank of Scotland and Lloyds Banking Group to be returned to the private sector more quickly in a way that maximises taxpayer returns.

The report said bank capital is increasing but there are concerns about toxic assets and weak profits in the system. It also raised concerns about lender forbearance and not putting enough aside to deal with risky assets or future conduct issues.

The international body praised “encouraging” UK economic data but said weak growth will remain and risks remain on the downside.

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