George Osborne's scheme to boost the housing market through state mortgage subsidies has been dubbed one of the "most stupid economic ideas" of the past 30 years by a leading City commentator.

Albert Edwards, who heads the global strategy team at Société Générale said the chancellor's flagship Help to Buy programme was artificially inflating property prices and driving young people deeper into "indentured servitude".

The chancellor said in the budget that the government would provide lenders with a guarantee of up to 20% of a mortgage in an attempt to provide potential buyers with a big enough deposit to purchase a home. If a borrower defaults on a loan, the taxpayer will be liable for a share of the losses.

Edwards – a high profile City strategist renowned as a market doomsayer – said the scheme was artificially propping up the market and preventing prices correcting to affordable levels. First-time buyers need cheaper homes, not greater availably of debt to inflate house prices even further, Edwards said. "This is madness."

He added that house prices were still overvalued despite Britain being at the epicentre of the global credit crisis and remaining in the "icy grip of private sector deleveraging". In other countries, such as the US, house prices were now cheap.

"Young people today haven't got a chance of buying a house at a reasonable price, even with rock bottom interest rates. The Nationwide Building Society data shows that the average first-time buyer in London is paying over 50% of their take home pay in mortgage repayments – and that is when interest rates are close to zero."

In a research note, Edwards said it made him "genuinely really angry" that burdening young people struggling to pay off student loans with more debt was seen as the solution to the problem of excessively expensive housing.

"Why are houses too expensive in the UK? Too much debt. So what is George Osborne's solution for first-time buyers unable to afford housing? Why, arrange for a government-guaranteed scheme to burden our young people with even more debt! Why don't we call this policy by the name it really is, namely the indentured servitude of our young people.

"I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business. It ranks above some of Alan Greenspan's very worst blunders."A number of experts have warned that Help to Buy will drive up house prices, pushing younger people out of the market. Sir Mervyn King, the outgoing governor of the Bank of England, has insisted the plan must remain temporary. He has expressed concern that the scheme "is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market."We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position.

"So, we mustn't let this scheme turn into a permanent scheme … when is the right time to terminate it will depend on economic conditions at the time."

The International Monetary Fund has also warned that the plan would fail to improve access to housing while the Treasury Select Committee and Office for Budget responsibility have warned it is likley to drive up house prices.

Help to Buy: who said what

Bank of England governor Mervyn King, 19 May

"This scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market.

"We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position.

"So, we mustn't let this scheme turn into a permanent scheme. Now when is the right time to terminate it will depend on economic conditions at the time."

International Monetary Fund, 22 May

"This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing."

Treasury select committee, 20 April

"The government's Help to Buy scheme is very much a work in progress. It may have a number of unintended consequences … It is by no means clear that a scheme, whose primary outcome may be to support house prices, will ultimately be in the interests of first time buyers. This is the group the government says it wants to help."

Stephen Nickell, Office for Budget Responsibility, 26 March

"The key is, is it just going to drive up house prices? By and large, in the short run the answer to that is yes. But in the medium term will the increased house prices stimulate more housebuilding, and our general answer to that would probably be 'a bit'. But the historical evidence suggests not very much."

Alistair Darling, 25 March

"The irony is we are not prepared to build houses, but we are prepared to stoke the finance of a bubble in housing prices, and… That seems to me to be absolutely wrong."

Simon Rubinsohn, Royal Institution of Chartered Surveyors, 22 March

"The range of measures announced under the Help to Buy scheme to kickstart the housing market are much needed. Helping those who cannot afford large deposits by using the government's balance sheet to guarantee mortgages and using capital savings to offer shared equity loans on new-build for all buyers will help prevent prolonged market stagnation … However, government needs to be careful this doesn't create another housing bubble."

Stewart Baseley, Home Builders Federation, 20 March

"A lack of affordable mortgage availability remains the biggest constraint on housing supply, something government now clearly understands and is looking to address … Building the homes the country desperately needs can be a key driver of economic activity. Government must be praised for its attempts to stimulate [housing market] activity, but must also be wary to get the details right."