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Economists have hit out at chancellor George Osborne鈥檚 plans to bolster the housing market with a 拢130bn mortgage guarantee scheme, after he called lenders and housebuilders to Downing Street to discuss the scheme.

Osborne sought to reassure doubters yesterday that the scheme, called Help to Buy and announced in the March budget, would not be used to back house purchases by people with 鈥渋mpaired credit鈥� as defined by the Financial Conduct Authority.

In addition the scheme, which underwrites mortgages for purchasers with deposits worth just 5% of the value of their house, won鈥檛 be used to back purchases of second homes, with beneficiaries of the scheme being asked to sign a declaration it is their only home.

Economists have said the plan risked promoting house price inflation, and tying the government in to long-term support for inflated house asset prices.

Graeme Leach, chief economist at the Institute of Directors, branded the government-backed mortgage guarantee scheme 鈥渧ery dangerous.鈥�

He told the Guardian: 鈥淭he housing market needs help to supply, not help to buy, and the extension of this scheme is very dangerous 鈥� the world must have gone mad for us to now be discussing endless taxpayer guarantees for mortgages.鈥�

Michael Pearce, assistant economist at Capital Economics, said Help to Buy risked reinflating the house price bubble that the UK saw in the run-up to the 2008 recession, adding it 鈥渃ould pop before the election鈥�.

In addition, Liberal Democrat peer Lord Oakeshott said told the Guardian Osborne was pouring fuel on the flames of an overheating housing market.

Earlier in the year the International Monetary Fund hit out at the proposal, saying that the resulting house price inflation might actually work against the aim of increasing the output of homes.

Osborne has previously said the mortgage guarantee element of the scheme would see 拢12bn of government guarantees used to back anything up to 拢130bn of home purchases 鈥� and would see both second hand and new build home purchases backed. It is due to launch in January 2014.

Nevertheless, housebuilders lined up this week to back the plans. Pete Redfern, chief executive of Taylor Wimpey said he believed the second phase of Help to Buy will 鈥渂enefit the whole market, particularly existing homeowners who want to move up the housing ladder but have been unable to do so鈥�.

The news came as the government revealed figures demonstrating the success of the first phase of Help to Buy, which expended the government鈥檚 previous equity loan scheme, First Buy.

The communities department said 6,899 homes had already been sold under the scheme, with the largest share of these being sold in the Midlands, where 1,873 transactions have been recorded.

A spokesperson for the Home Builders鈥� Federation said its members were making around 500 reservations a week under the scheme, a run-rate equivalent to over 25,000 transactions a year.

The figures mean the government is on track to hit its target for 74,000 house purchases to be funded through the 拢3.5bn subsidy scheme over the next three years.