It is not the Bank of England’s job to control house prices in the UK – that’s according to the Bank’s new director of financial stability, Spencer Dale, reports the Mail on Sunday.
Dale was also reported as having said that property prices will be “determined by the underlying conditions of the market.”
And that despite the concerns over a property bubble the Bank expects prices to rise over the next 3 years by 20 per cent.
According to the article the aim of the new package of lending measures put forward by the Financial Policy Committee is not to put a halt to price increases but to prevent homeowner debts. Dale is also reported as saying that readers of the Mail on Sunday who have house insurance “should think of the measures we have taken as insurance for the country’s housing market.”
The Mail on Sunday went onto report that under the new rules put forward by the Financial Policy Committee no more than 15 per cent of the bank’s total mortgage lending should be to homeowners borrowing more than 4.5 times their annual income. Lenders would also need to be satisfied that if there were a rate rise of 3 per cent, their client would still be able to afford their repayments.
In the article Mr Dale suggested that in the future the Bank should be judged on its success in keeping overall household indebtedness down, and not suppressing house prices.
As many of our home insurance clients will be aware, house price rises have hit the headlines a great deal in the past months. But do you think that the tighter restrictions on the amount banks can lend to home buyers will simply see more people forced into the rental sector? Or are the measures a good way to help protect homeowners from any future financial instability. As always we welcome your comments.