Subsidy may not lift home prices: BoE's Barker

A government plan to help up to 100,000 Britons buy their own homes may not push up house prices as the government is committed to increasing supply, Bank of England policymaker Kate Barker said yesterday.

Under the government plans, to be set out today people currently unable to afford a home would be able to share the cost with the government and a mortgage lender in a bid to get more Britons on the property ladder.

Some analysts have said the scheme threatens to light another fire under the country's housing market just when price growth appears to have cooled off after five Bank of England interest rates rises in 1-1/2 years.

But Ms Barker, who has written a review on housing affordability on behalf of the government, seemed nonchalant.

"Of course they run the risk of pushing up prices and of course that would be absolutely true if you introduce more subsidies but did nothing about supply," she told a property conference in Bristol.

"However what we have now is a government that is committed to both introducing subsidies and to increasing supply."

Responding to questions from reporters, Ms Barker made it clear that the central bank did not target house prices but the property market was just one of the factors it looked at to ensure inflation achieved its two per cent target.

"What we wanted to achieve when we were raising interest rates was straightforwardly to hit our (inflation) target and we thought rising house prices were part of a whole lot of evidence in the early part of the year that suggested demand was running ahead of supply.

"Clearly the housing market can't go on rising at 20 per cent a year and you hope that when it stops rising at 20 per cent a year it doesn't go to the other extreme and have a bust."