Help to Buy - Will It Become the UK Fannie Mae?

Help to Buy should not be a permanent feature of the mortgage market or become the UK equivalent of Fannie Mae, the Government owned mortgage arm which crashed in 2008 claims BSA Chairman

Building Societies Association chairman David Webster has urged the Government to ensure its new £130bn mortgage indemnity insurance scheme does not become a permanent feature of the mortgage market.

Speaking at the BSA's annual conference in Harrogate, Webster called on the Government to form an "exit plan" to ensure it is not permanently supporting the mortgage market.

He pointed to the situation in the United States during the 1930s where Fannie Mae was created by the Government to provide finance to local banks.

He said: "In the US, Fannie Mae was introduced in 1938 as a short-term means of increasing lending and broadening the spectrum of lenders during the Great Depression - that temporary scheme remained in place until it hit severe financial problems in 2008 - 70 years later.

It is still a policy headache for the US administration. "It seems to be very seductive for governments in the UK of all political shades to intervene to fix our housing market, but let's hope we do not have to wait 70 years for the current set of fixes to be deemed redundant."

His warning comes less than a month after the Treasury decided to extend the Funding for Lending scheme, which offers lenders cheap funding in exchange for maintaining or increasing their net lending, by a year to January 2015.