Is Britain heading for a housing boom?

At the last Budget, chancellor George Osborne "reached for the home-ownership Viagra" when he announced measures to encourage people onto the housing ladder, says Kamal Ahmed in The Daily Telegraph.

Under the first phase of the Help to Buy scheme, purchasers of new-build homes can put down a deposit of just 5%, with the government providing interest-free loans of 20%. Under the second, more controversial phase launching in January, taxpayer-backed loans will be available to buyers of properties worth up to £600,000. With the Bank of England's (BoE) Funding for Lending scheme already cutting mortgage costs, house prices are now rising at "quite a clip".

But throw in BoE governor Mark Carney's stated intention of keeping interest rates at ultra-low levels till 2016, and we could have a "lethal cocktail generating a sickly and dangerous new housing boom", says Dan Atkinson in the Daily Mail.

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Credit ratings agency Fitch has joined the International Monetary Fund, Lord King the former BoE governor and Vince Cable, the business secretary, in expressing concern. With house prices high by historical standards (price-to-earnings ratios are returning to levels that preceded the US sub-prime crash, notes Ahmed), the government faces "growing calls" to drop the second phase of the scheme, says Tanya Powley in the FT.

The scheme "addresses the wrong problem", says The Independent. There aren't too few people who want to buy there "is a shortage of homes for them to purchase". Boosting demand without addressing supply particularly when the mortgages are underwritten by the state, encouraging reckless lending will only drive prices even higher. But "a house-price boom is precisely what the government wants", notes Russell Lynch in a recent London Evening Standard column.

The government's lead in the polls moves "virtually in lockstep" with the change in house prices.The trouble is, "artificial inflation of the housing market may encourage the feel good factor, but we still haven't heard what happens when the guarantee scheme ends, and the potential impact on tens of thousands of households saddled with 95% loan-to-value mortgages in a much choppier market". In any case, politicians should not "lazily assume"that rising house prices will always be political gold, notesThe Guardian. A "new generation of voters has learned the hard way that a house-price bubble is not the bedrock of economic prosperity and security that many of their 1980s forebears believed".

A better solution, says Alex Morton of the Policy Exchange think tank in City AM, would be for Help to Buy to be redirected "toward guaranteeing custom-build mortgages to pay for people to build their own homes", which would reduce the "political tensions around new development". Not only would this address a genuine need, but it also "links more credit to increasing supply". Let's hope the chancellor revisits the policy. "By blowing a housing bubble, he risks detonating a bomb both under the British economy and his own political career."