Efforts to revive the mortgage market have been "well-timed" and will not lead to another housing market bubble, a leading forecaster said today.
The EY ITEM Club boosted its estimate for GDP this year to 1.4%, a figure which compares with 1.1% a quarter earlier, due to the improving outlook for the housing market and associated pick-up in consumer confidence.
The group said initiatives such as the Help to Buy mortgage guarantee scheme would result in house prices rising by 3.5% this year and by 6.6% in 2014.
But Peter Spencer, ITEM's chief economic adviser, said "hysteria" that the latest phase of Help to Buy could lead to another housing bubble was unfounded.
He added: "The Government's efforts to revive the mortgage market have been well-timed and targeted, and will benefit most regions in England.
"Despite the recent criticism of these initiatives, the chances of seeing another housing market bubble are extremely slim.
"House prices and transactions are only just recovering from the credit crunch and will be paltry in comparison to those of a decade ago. Household finances are also in much better shape, with debt to income ratios now at sustainable levels."
The ITEM Club, which uses the Treasury's economic model for its forecasts, said UK's short-term growth will continue to be fuelled by the consumer.
Despite only a modest increase in disposable incomes of 0.2% this year, consumer spending is forecast to grow by 1.6% and 1.9% in 2014. As a result, saving ratios will ease back to 5.7%, down from last year's 6.8%.
It predicts that the most significant boost to UK growth will come next year, when the revival in business investment and exports kicks in.
Mr Spencer said the UK recovery was now firmly entrenched but warned that there were still big risks to the forecasts.
He added: "The boost from the consumer has pushed the UK economy into a progressively higher orbit, but this now needs to be supplemented by a thrust from the engines of export and investment.
"Otherwise, there's a real risk that the recovery will falter in the face of the sustained pressure on real incomes from high prices and low wage inflation."