Help to Buy could increase house prices 20% by 2015
Fathom Consulting suggested under normal conditions, the government scheme would lead house prices to inflate by 10%.
However, the promotion of 95% loan-to-value mortgages indicated a looser market, meaning the figure could be more like 20%.
Using recent house price index figures, this means the average first-time buyer house price could reach over £150,000 and the average house price come close to £300,000 in two years.
According to the report, Help to Buy is a reckless scheme which has the potential to increase house prices and hike up household debt to record levels.
It said: “Had we been asked to design a policy that would guarantee maximum damage to the UK’s long-term growth prospects and its fragile credit rating, this would be it.”
The scheme allows a homebuyer to take out a mortgage with a deposit of 5%, as the government underwrites 14.25% of the property and the lender guarantees a further 0.75%.
The report also highlighted that the Monetary Policy Committee is unlikely to react to another housing price bubble by tightening monetary policy.