Carney ready to cool housing market


%VIRTUAL-SkimlinksPromo%Bank of England Governor Mark Carney has signalled he is ready to take action to cool Britain's surging housing market amid fears that a new property price bubble could derail the economic recovery.

Mr Carney said the Bank could adopt a range of measures - including imposing a new "affordability test" for borrowers and advising the Government to rein in its controversial Help to Buy scheme.
"We could do more, we could take steps around affordability to test whether or not individuals can afford mortgages at much higher interest rates," he told Sky News's Murnaghan programme.

"We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice - the Chancellor has asked us if we would provide advice on changing the terms of Help to Buy - all those things are possibilities and we will consider them all."

Prime Minister David Cameron said the Bank had "all the powers they need" to prevent a new asset price bubble developing.

However Deputy Prime Minister Nick Clegg said that if the Governor advised that Help to Buy - which provides taxpayer-backed mortgages for first-time buyers - should be curtailed, ministers must act.

Mr Carney said that, ultimately, the "deep, deep structural problems" in the property market - with demand far outstripping supply - could only be addressed through a major expansion of the housing

"There are not sufficient houses built in the UK," he said.

With housing prices now rising at a rate of 10% a year across the country - and significantly faster in some regions - Mr Carney said that the housing market now represented the biggest threat to the recovery.

He expressed particular concern about the return of large mortgages - more than four times a borrower's salary - which were associated with the financial crash of 2008 and which were, he said, "creeping up" again.

"We don't want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term," he said.

"The biggest risk to financial stability, and therefore to the durability of the expansion - those risks centre in the housing market and that's why we are focused on that."

While he said that while Chancellor George Osborne's flagship Help to Buy scheme was still a "relatively small programme", it had the potential to grow and "could change attitudes in other parts of the mortgage market".

"That's why we have to be vigilant," he said.

For Labour, shadow chancellor Ed Balls said that ministers must heed the Governor's warning, otherwise the Bank could be forced to put up interest rates "prematurely".

"The Chancellor cannot wash his hands of what's happening in the housing market," he said. "Labour is clear that you can't deal with the cost-of-living crisis without building many more homes."

Campbell Robb, of the housing and homelessness charity, Shelter, said Mr Carney's comments underlined the need for the Government to bring forward policies to boost housebuilding.

"Mark Carney's comments will ring a bell with the young people and families who are hearing good news about the economy, but still aren't finding it any easier to climb on the property ladder and get on in life," he said.

The people who affect house prices
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Carney ready to cool housing market

They have the power to push a price higher, depending on how many other people are in the running for a home and how liberal they want to be with the truth to the buyers. In some cases, they can also do more harm than good by initially overvaluing a property. The worst case scenario is the home eventually sells for less than it would have done had it been priced realistically in the first place.

Sometimes a quick-moving solicitor can be the difference between getting the home at the price you want and getting into a bidding war or missing out entirely. If the buyer needs a quick sale, they're more likely to do a deal with someone who has a flexible solicitor who can push through the sale so it suits them.

Research by Halifax concluded that anti-social neighbours could take £31,000 off the price of an average home. If you’re selling, you should declare any problems you’ve had on a Seller’s Property Information Form, otherwise you could face a claim later on.

While an increase in Council Tax might not be too much of a deterrent to a potential buyer, plans to grant permission for new homes, a mobile phone mast or wind turbines could knock an asking price down. If you're a buyer, the local council should have details of any future planning applications and you can search them for a small fee.

A lot of traffic in an area obviously has an effect on air quality. Since 1997 each local authority in the UK has carried out studies of the air quality in its area. If an area falls below a national benchmark for air quality, it has to be declared an Air Quality Management Area (AQMA). Some residents of the Llandaff area of Cardiff expressed concern that it had become an AQMA due to an increase in traffic in the area. Whether this becomes a widespread issue remains to be seen.

Mortgage availability is a key driver of property prices. If no-one can take out a mortgage, then prices will stall and eventually fall. We've seen this happen in parts of the UK in recent years, as lenders tightened up their criteria following the credit crunch. Conversely, good mortgage availability will mean more people are competing for properties - to a seller's advantage if their home is desirable.

An outstanding local school can add around 8% to the value of a home, according to the Royal Institution of Chartered Surveyors. On the flipside, a not so good Ofsted report can take off a similar amount. If you’re concerned about a school’s performance, one way to get involved is to become a governor.

Initiatives such as the Help To Buy scheme have been credited with pushing house prices up. A buoyant economy with strong employment gives people the confidence to buy and leads to an upward shift in house prices, while rises in unemployment have the reverse effect. Planning restrictions, at both a national and local government level, affect the number of homes in a particular area.

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