UK lawmakers say mortgage scheme may be costly or counterproductive

* UK lawmakers cast doubt on Osborne's 'Help to Buy' scheme

* Scheme was flagship measure in annual budget statement

* Lawmakers warn of "unintended consequences", effect on BoE

By David Milliken

LONDON, April 20 (Reuters) - A British government scheme tohelp home-buyers risks being costly, counterproductive and adanger to the Bank of England's political independence, anon-partisan committee of legislators said on Saturday.

Finance minister George Osborne pledged to guarantee up to130 billion pounds ($198 billion) of higher-risk mortgages andoffer 3.5 billion pounds of shared-equity loans to home-buyersin his annual budget statement last month.

But in a report on Osborne's budget, a parliamentarycommittee said the plans were vague and left the governmentexposed to large potential losses as well as failing toeffectively tackle a shortage of housing.

Committee chairman Andrew Tyrie - a member of Osborne'sConservative party - said the loan guarantees "may have a numberof unintended consequences".

"It is by no means clear that a scheme, whose primaryoutcome may be to support house prices, will ultimately be inthe interests of first-time buyers," the report concluded.

The government has not yet published details of the fees itwill charge banks to cover the expected costs of defaults underthe scheme, and the committee said this would be hard tocalculate accurately. It was also not convinced by Osborne'sclaims that it would tackle a shortage of homes to buy.

On Friday, Osborne defended his plans to reporters at abriefing in Washington, where he was attending an InternationalMonetary Fund meeting.

"We are in a period of real weakness in the housing market,so I think the risks of a housing bubble are reallynon-existent," he said.

"The absolutely key thing is that this scheme istime-limited and we have given the keys to its continuedoperation to the Bank of England's Financial Policy Committee(FPC) which can turn this scheme off in the next parliament," headded.

But exactly this concerned the lawmakers, who worried thathaving to make a final decision on the scheme after three yearsof operation could hurt the BoE's independence.

"Any decision to continue with the scheme should probably bemade by government, on the basis of advice from the FPC," Tyriesaid.

In his budget Osborne also tweaked the BoE'sinflation-fighting remit to give it more scope to ignoreprotracted overshoots in inflation if it expects them to betemporary.

Policymakers have said they do not expect it to change howthey act, but Tyrie said his committee would launch an inquiryinto monetary policy and keep a close watch on inflation.

The committee also called for future changes in the BoE'sremit to require parliamentary approval, rather than being inthe gift of the government.