State-owned mortgage company boss Richard Banks has welcomed the prospect of house prices rising as a result of the Government’s Help to Buy scheme which enables people to buy a home with a deposit of just five per cent.

Richard Banks, managing director of Crossflatts-based UK Asset Resolution, which manages the loans of failed lenders Bradford & Bingley and Northern Rock, says Help to Buy could speed up the repayment of its £42 billion taxpayer loan by lifting house prices.

Mr Banks said this could help lift customers out of negative equity – where loans exceed the value of their homes. About 28 per cent, or 182,000, UKAR borrowers are in negative equity.

He said: “If house prices go up outside London, it is a good thing for us as quite a few of our customers are trapped by their high loan-to-values.

“If higher house prices mean sufficient customers are able to and choose to remortgage with another mortgage provider, it may facilitate UKAR being able to pay off the Government loan more quickly.”

UKAR, which employs 1,300 people at the former B&B Crossflatts headquarters and another 1,000 near Sunderland, expects to be winding down its loan book for the next two decades or so. It still owes the Treasury £42.1 billion.

It paid another £1.9 billion to taxpayers in the first half of the year, taking the total repaid to the Government to nearly £7 billion, about £3 billion more than scheduled at this stage.

UKAR took over the B&B mortgage business after the demise of the former building society-turned-bank in 2008 and later took on the ‘bad’ loans from the former Northern Rock, while the rest of the North East-based lender was sold to Virgin Money and rebranded.

Philip McLelland, UKAR finance director, said the company was maintaining its proactive policies of directing customers towards cheaper loans elsewhere and also checking whether borrowers with interest-only mortgages were taking steps to also repay the capital sum.

UKAR’s view about Help to Buy contradicts that of Antonio Horta-Osorio, the boss of state-backed lender Lloyds, who has warned that the scheme risks creating a dangerous house price bubble unless it is matched with a boost in housebuilding.

He called for relaxed planning and building rules and more social housing projects so that rising mortgage approvals do not drive up house prices.

House builder Taylor Wimpey has reported surging demand at its Fairview Green development in Pudsey due to the strong uptake of Help to Buy.

Recent official figures showed mortgage approvals running at a five-and-a-half-year high in August, while data from Nationwide showed house prices rose at their fastest annual pace in more than three years in September as the market revival spread across the UK.