08/10/2013 09:10 BST | Updated 11/10/2013 19:51 BST

George Osborne's Help To Buy Scheme Could Threaten UK Financial Stability, Warn MPs

The Chancellor George Osborne speaks to delegates during the Conservative Conference 2013, held at Manchester Central

George Osborne's flagship Help To Buy mortgage guarantee scheme has launched today as MPs warned it could cause another housing bubble and undermine the UK's financial stability.

The scheme will allow thousands of people to buy a house worth up to £600,000 with a 5% deposit, with the government guaranteeing just 15% of the loan. The Chancellor has already asked the Bank of England to annually review its effect on the housing market.

Critics, including LibDem business secretary Vince Cable, fear it could inflate house prices as house builders fail to build enough properties to match the rising demand.

RBS, Lloyds and HSBC have confirmed they would begin offering mortgages worth up to 95% of the property value under the scheme. Virgin Money and Aldermore Bank are set to roll out offers next year.

However, Andrew Tyrie, chair of the Commons Treasury select committee, said that any mistakes in the management of the scheme could "carry threats to financial stability".

He said: "Given the chequered history of government interventions in residential property, great care will need to be taken in both the construction and running of this scheme. Mistakes could distort the housing market or carry threats to financial stability."

The Treasury select committee chair said ministers could also be forced by "immense" pressure to extend the scheme, which is set to last for three years, if it proves popular.