Controversial UK scheme for cheaper mortgages to be reined in

A controversial UK scheme, Help to Buy, for making mortgages cheaper would be reined in within months as concerns rose that the housing market was in danger of overheating.

According to chancellor George Osborne, the Bank of England was vigilant about the increasing cost of property in many areas and would intervene if needed, Mailonline reported.

Osborne's comments came in reponse to an international report that the UK's booming housing market was becoming a threat to its economic recovery.

With prices increasing at up to 10 per cent a year, the Organisation for Economic Co-operation and Development said there was a danger that people were borrowing more than they could ever pay back.

The OECD added house buyers needed to put down larger deposits.

House prices rose at the fastest pace since the start of the financial crisis last month, though they remained below their pre-crisis peak in some areas.

Though the bank initially dismissed the suggestion of an overheating market, one of its deputy governors, Jon Cunliffe last week, hinted it was time to address the impact of Help to Buy on the sharp rise in prices.

The OECD urged that the bank tighten access to Help to Buy funds, which provided guarantees for mortgages as it sought to help first-time buyers into the market.

The intervention from the OECD comes after senior figures at the bank identified the housing market as the biggest threat to the financial stability of the UK.

Labour leader, Ed Miliband had also called for new limits on the housing market, as also legal curbs on wealthy foreigners seeking to buy property in London.

In a report on the global economy, the OECD raised its predictions for the UK's economic growth and now expected the UK to grow by 3.2 per cent in 2014, up significantly from its last forecast of 2.4 per cent.

The think tank at the same time had flagged the rapid increase in house prices that came with the return to economic growth.