To Cool Housing Market, Britain Curtails Loan Help LONDON - In a surprise step aimed at keeping Britain's housing market from overheating, the Bank of England on Thursday scaled back a government program that encouraged mortgage lending. Mark J. Carney, the governor of the Bank of England, said that the central bank and the Treasury had agreed that it was best to no longer support new lending for mortgages and other uses through the so-called Funding for Lending program, and to focus on new loans to businesses instead. The changes to the lending program would be effective at the beginning of the year. The government said the changes would not affect a separate program aimed at helping people obtain mortgages, called Help to Buy. "Although the growth in household loan volumes remains modest, activity in the housing market is picking up and house price inflation appears to be gaining momentum," the Bank of England and the Treasury said in a joint statement on Thursday. As a result, there is no longer a need for the Funding for Lending scheme to provide further broad support to household lending. George Osborne, who as chancellor of the Exchequer heads the Treasury, and the Bank of England announced the program to much fanfare in 2012, just after Britain had experienced its first double-dip recession since the 1970s. The idea was to improve the availability of credit to businesses and households. Under the Funding for Lending program, banks get access to cheaper funding depending on how much more they lend. The total amount of funds made available under the program was 17.57 billion pounds, or about $28.7 billion, at the end of June, according to the Bank of England. Since then, the economy has returned to growth and housing price increases are back to precrisis levels. House prices have risen across Britain, but most sharply in London, where demand from overseas buyers has helped to push up property values in the city, where the supply of homes is relatively small. The value of a home in the capital rose 10.2 percent to an average £544,232 pounds, or more than $889,000, in October from a month earlier, according to Rightmove, a property website. The step is the first by the Bank of England aimed at cooling what many economists have warned could be the beginning of a new property bubble in Britain. In addition to the Funding for Lending program, the government started this year the Help to Buy program, which reduced the deposit required by banks to get a mortgage. Thousands of aspiring homeowners applied. Howard Archer, an economist at IHS in London, said that scaling back the Funding for Lending program was "hugely sensible and justifiable." "A steadily improving housing market is supportive to economic activity and growth prospects," he said. However, it is vitally important for economic stability and longer-term growth prospects that a new housing price bubble does not develop. Although Funding for Lending was widely considered a success, the Labour Party, in the opposition, had raised questions about its effectiveness in making more credit available for smaller businesses, Britain's biggest category of employer. Cathy Jamieson, the Labour spokeswoman for economic policy, said the change to the government program was "an admission that the Funding for Lending scheme has badly failed Britain's businesses." The Royal Bank of Scotland, the British bank that is majority-owned by the government after a 2008 bailout, this week became the latest lender to come under pressure for its relatively low level of lending to small and midsize businesses. Its chief executive, Ross McEwan, had pledged to increase lending to smaller companies and also to investigate recent accusations that the bank deliberately pushed some clients into default. "Although the changes to the Funding for Lending scheme may be a surprise, they are not a shock," said Paul Smee, director general of the Council of Mortgage Lenders, a trade organization. Mortgage lenders are well equipped to meet their funding needs, as wholesale funding market conditions have improved and retail deposits are robust.