Housebuilders urged to build more homes to prevent price bubble The Treasury has put pressure on housebuilders to increase production amid growing concerns that the government's Help to Buy mortgage guarantee scheme will stimulate a house price bubble. When he revealed details of the second, £12bn, phase of the scheme on Tuesday, George Osborne, chancellor, deliberately invited representatives from the UK's biggest housebuilding companies as well as the biggest mortgage lenders. He was sending a signal that the government is keen to extract greater volumes of new homes from the industry in return for government support for the housing market. Housebuilders said the Treasury has held a series of meetings and conversations with industry over the past few months to pressure the bigger construction firms into setting ambitious targets for the number of new homes they would deliver. Although nearly all the larger, listed housebuilders have said they will increase production, they have declined to provide definitive forecasts. Nevertheless, housebuilders spoke up at Tuesday's meeting to counter concerns that the scheme would cause rampant price inflation. "If they can put housebuilders in the room saying we're going to increase demand, then you're not going to get a house price bubble," said one person at the talks. If supply matches demand, you're not going to get rampant inflation. Another attendee said: "The biggest constraint on supply is a lack of mortgage availability . . . what they are trying to demonstrate is that housebuilders will ramp up supply as a result." Lloyds Banking Group, the UK's biggest mortgage lender, became the first of the high street banks to commit to the second phase of the scheme on Tuesday. Housebuilders present at the talks also indicated that uncertainty over planning applications being granted on developments was a factor in not disclosing a public target. "The Treasury pushed us as hard as we can to give us a figure - but there's a lot of determinants on that figure so we are reluctant to commit; it relies on planning, managing the supply chain, the banks and all kinds of things," said one builder. Mr Osborne said the scheme would not pump up a housing bubble before the end of its three-year lifespan. Others are more cynical, believing the chancellor is trying to stoke a housing boom before the next election. A Treasury official said yesterday that the scheme could create a short-term increase in prices, but the programme is also designed to unlock construction of new homes. Housebuilders were there this morning because we wanted them to see that the interest from lenders was there. We want them to start making plans now and the best way to convince them there will be greater lending was to hear it from the horse's mouth, from the lenders. At the moment, they are sitting on huge land banks because they are not convinced that, if they start building, they can get a decent return. Pat McFadden, Labour member of the treasury committee, said it would be simpler for the government to intervene directly to build new homes. "Obviously the politics are that you increase a feelgood factor for people who own homes," he said. But this runs counter to everything the government says about rebalancing the economy away from a dependence on the housing market.