Treasury Committee chairman Andrew Tyrie has written to Bank Governor Mark Carney asking him to clarify exactly what the Bank's role will be in overseeing the new phase of the Government's controversial Help to Buy scheme, which was launched last month.
Lenders representing most of the mortgage market have confirmed they plan to take part in the initiative to add more fuel to the housing market by offering state-backed mortgages to people with deposits as low as 5%. Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland are already offering loans under the scheme.
The new phase of Help to Buy, which is set to run until January 2017, is intended as a "temporary measure" to kick-start the market and offer better mortgage access to credit-worthy borrowers who are struggling to move on to or up the property ladder because they have only small amounts of cash to fund their up-front costs.
But critics of the scheme argue that without any big increase in the supply of homes on the market, Help to Buy will simply create a boom in house prices by turning the heat up on demand. They argue that the rise in prices will offset some of the benefits the initiative could bring to aspiring home owners as people will be faced with raising a larger deposit to keep up with the price increases.
Every September, the Government and the Bank of England's Financial Policy Committee (FPC), which oversees stability, will review the impact of the scheme and examine whether it needs to be adjusted. The Government has said that the committee would need to agree to any proposed extension of the scheme beyond its planned three-year life.
The letter quotes Deputy Prime Minister Nick Clegg telling the Daily Telegraph last month that the Bank of England has been given the right to "turn off" Help to Buy.
It also quotes Conservative party chairman Grant Shapps telling BBC Breakfast News in September that the Bank of England has been put "solidly in charge" of Help to Buy, to prevent any "housing bubble".
In his letter, Mr Tyrie asks Mr Carney: "Can you confirm that, contrary to remarks of several ministers, the FPC does not have a veto on any decision to maintain the scheme during its planned three-year life or later, were it to be extended?"
Commenting on the letter, Mr Tyrie said: "The scope and limits of the Bank's role in this scheme need a good deal of clarification, both to safeguard the Bank's authority to act in fulfilment of its statutory responsibility for financial stability and to safeguard its independence."
A spokeswoman for the Bank of England said it will respond to Mr Tyrie's letter "in due course".
There have already been signs of some sharp increases to house prices in some areas, with Halifax reporting this week that prices have risen by almost 7% year-on-year across the country.
Council of Mortgage Lenders chairman Nigel Terrington warned this week that the housing market risks becoming "addicted" to the new phase of Help to Buy unless a clear exit strategy is set out.
Mr Terrington told a mortgage conference in London: "We don't want our customers - or the lending community - or indeed the political party of the day - to become addicted to the scheme as a permanent component of the UK's financial system."
© 2013 Press Association