OECD: UK must curb Help to Buy

The Paris-based think tank called for “prudential regulatory measures” to ensure a balanced housing market recovery.

The report said: “Additional use of macro-prudential and other tools to help ensure a balanced recovery should be considered, including tighter access to the Help to Buy programme.”

Other suggestions were the introduction of higher capital requirements and lower maximum loan to value ratios on mortgages.

The report added: “With an improving but still insufficient response of supply to vibrant housing demand, house prices are buoyant and significantly exceed long-term averages relative to rents and household incomes.

“Macro-prudential measures are rightly being taken to restrain housing demand financed by bank debt.”

The think tank supported the government’s move to make household lending ineligible for the Funding for Lending Scheme in November 2013.

Interest rates are expected to rise in mid-2015 to keep inflation in check.

Despite the warnings, the report said: “The recovery has picked up to a robust pace, with a very accommodative monetary policy and an improving labour market supporting household consumption.”

The think tank expects UK GDP growth to hit 3.2% in 2014 driven by business investment and private consumption, meaning the unemployment rate should fall further from 7.6% in 2013 to 6.9% in 2014, while wage growth should pick up.