Bank Of England Set For New Buy-To-Let Powers

The Bank of England seems set to be given greater powers over the buy-to-let market, after the Chancellor expressed concern about the housing "bubble". A consultation was launched late last year after the Financial Policy Committee, which is part of the Bank of England, recommended it should be granted the power to direct regulators to require lenders to restrict buy-to-let loans. The powers included allowing the FPC to cap the maximum loan-to-value ratio (the size of the loan relative to the value of the property), as well as the costs of debt servicing relative to rents. The FPC, whose role is to identify and head-off possible risks to the financial system, has had similar powers over residential mortgages since April last year. Read more on the Sky News website.

Help To Buy Will Just Hinder Efforts To Solve The Housing Crisis

We shouldn’t be surprised that both the Treasury and the Bank of England are increasingly concerned about the burgeoning growth in buy to let. In the summer budget, the chancellor limited some of the tax deductions landlords can claim, with the aim of levelling the playing field with owner-occupiers; and in the autumn statement, he clobbered buy to letters – and second home owners – with a 3% stamp duty surcharge. Meanwhile, the Bank’s financial policy committee, which has the job of preventing a future crash, worries that buy-to-let landlords could bail out quickly in case of trouble, and are more at risk if interest rates rise. So the FPC announced that it may turn its new “macroprudential” tools on the sector. Governor Mark Carney has made it clear that he sees these new powers, which are meant to allow it to rein in lending in specific pockets of the economy without clobbering growth, as the first line of defence against a housing bubble. Read more on the Observer website.

Housing Bubble Fear Over UK’s £200billion Buy-To-Let Borrowing

Britain's buy-to-let landlords owe more than £200billion on their mortgages - equivalent to the total size of Hong Kong’s economy. The revelation about the massive scale of the debt fuelled concerns that the buy-to-let market could be badly hit by expected interest rate rises and the impact of government interference. The Council of Mortgage Lenders (CML) published the figure as it claimed a combination of proposed tax and rule changes could create ‘uncertainty’, and it urged ministers to consider the risks. Brokers said the boom in buy-to-let mortgages had caused ‘micro bubbles’ in the housing market as landlords swarmed into profitable areas, pushing up prices. The CML data showed the amount outstanding on Britain’s buy-to-let mortgages has grown by £44billion in the past five years to reach more than £200billion. Read more on the CML website.

Skills Shortage and Housing Bubble Have Arrived Very Early In the Economic Cycle

Can it be true that only 18 months into a recovery we seem already to have the worst signs of overheating, with employers complaining of a chronic shortage of skilled workers in the midst of a rampantly rising housing market? It seems bizarre when Britain has only just clawed back the output lost in the last recession. Such worries usually follow a 10-year run of growth, and one that looks exhausted and unstable. Then it comes as no surprise to be watching as house prices rise to unsustainable levels and employers source workers from abroad. After all, that was how 2005 looked following a decade of success. Read more on the Guardian website.

Cable Demands Action to Tackle London Housing Bubble

Vince Cable has called for action to tackle the overheating London housing market, warning that a premature rise in interest rates will hit the recovery in manufacturing and exports in the North of England. The Liberal Democrat MP told The Yorkshire Post that the housing bubble in the capital needs to be deflated. Mr Cable said: “The risk is that if you continue to get this runaway boom in house prices in the South East and particularly London then the Bank of England is tempted to put up interest rates sooner than they otherwise would do and that in turn pushes up the exchange rate and ​that makes it difficult for people to export. That’s the worry and that’s why the boil has got to be lanced.” Read more on the Yorkshire Post website.

Exhausting Help to Buy Pot Would Create Housing Bubble

A housing market bubble could develop in Britain if the second stage of the Government’s Help to Buy scheme is as successful as the Treasury hopes, leading economists have warned.  George Osborne has ringfenced support for as much as £130bn of high loan-to-value mortgages through £12bn of guarantees by the time the programme finishes in 2016, although early data has indicated that it will be less popular than the Chancellor had banked on.  Exhausting the pot would imply about 14pc of all housing transactions making use of the scheme.  In comparison, in the first six months of the scheme, it only represented 1.2pc of all housing transactions.  Read more on the Daily Telegraph website.

OECD Warns Housing Market Is At Risk of 'Overheating'

The international think tank has said help to buy may be fuelling a housing bubble. In its latest economic forecast, the Organisation for Economic Co-operation and Development suggests ‘reducing housing market stimulus’ should be considered to avoid the housing market overheating. The OECD says that, for the UK, there is a ‘downside risk’ that ‘policies are ineffective in containing the housing market, resulting in overheating’. The latest figures from the Land Registry for March show house prices across the UK have risen by 5.6 per cent year-on-year. However, lenders have reported higher annual average increases. Read more on Inside Housing.

Housing Bubble Brewing

Home ownership has now become “unaffordable” to people on middle incomes, Vince Cable admitted, as he warned that the bubble developing in the housing market could be more serious than during the last property crash. Amid growing tension between the Conservatives and Liberal Democrats over rising house prices, the Business Secretary told The Independent: “The fundamental problem is a chronic imbalance between supply and demand. A recovering mortgage market is just fuelling demand again.” Mr Cable warned: “A family on average income is nowhere near able to afford a house at the average price. Property has become much more unaffordable for people on middle incomes.” Read more on the Independent website.

Fears of Bubble As Demand Far Outstrips Supply

Fears that Britain's housing market is headed for bubble territory have been stoked by fresh evidence that demand is far outstripping supply. As the market heats up, buyers desperate to secure a property are paying the highest proportion of asking prices seen for a decade, according to a report from property researchers Hometrack. In London, buyers are paying more than 99% of asking prices against a backdrop of soaring demand from foreign investors and local house hunters The figures come alongside a warning that the south of England faces a shortfall of at least 160,000 homes by 2018. An analysis of building projects by upmarket estate agent Savills finds that local planning authorities are "simply not planning enough new homes to meet the growing housing need." Read more on the Hometrack website.

Housing Crisis Will Continue For 10 Years

George Osborne has warned that Britain's housing shortage is likely to persist for at least 10 more years. The chancellor insisted the coalition's controversial planning shakeup was having a positive effect, and played down fears of a property bubble. But he admitted more needed to be done to overcome the "historic" imbalance between supply and demand. Osborne's comments came as he gave evidence to the Lords economic affairs committee. He gave an optimistic assessment of the UK's prospects, saying the fledgling recovery was "sustainable". But he also expressed concerns about international risks, including "weakness in some of the European economies", issues in emerging economies and uncertainty about the fortunes of the US. Read more on the Guardian website. 

Prime Minister Plays Down Danger of Housing Bubble

Prime Minister David Cameron has moved to allay fears that the government’s flagship Help to Buy Scheme is risking a potential ‘housing bubble’ in the market, branding the scheme as a ‘complete success’.  Mr Cameron praised the impact the scheme has had in such a short space of time, and highlighted that over 700 houses had been purchased and another 6000 were experiencing some form of market interest since it began earlier last year. Cameron also highlighted that the current level of property prices are still significantly lower than back in 2007, and would be monitored closely to ensure that no dangerous outcomes are incurred as an effect of the Help to Buy scheme. Read more on the Housing Excellence website.

Help to Buy Is Not Fuelling Housing Bubble, Says Cameron

David Cameron dismissed concerns from Labour and coalition ministers that the government's Help to Buy scheme may be feeding a housing bubble as he promoted its next phase. The prime minister branded sceptics of the mortgage guarantees – such as the Liberal Democrat business secretary, Vince Cable, "London-centric" and claimed that in many parts of the country prices were "barely moving at all". His defence of the government scheme came as he promoted new figures which claim to show that more than 6,000 people have put offers in on homes and applied for mortgages using Help to Buy since it was launched about three months ago. Read more on the Guardian website.

Osborne Challenged Over Housing Bubble Denial

George Osborne has flatly denied that a housing bubble is forming, only to be contradicted hours later by one of his Tory predecessors. The current chancellor promised that any big rises in house prices would be curbed, and the UK would have a "responsible recovery". He said there is "not a housing bubble at the moment". However, Lord Lamont, a chancellor under Sir John Major, promptly offered the opposite view, suggesting there is a danger that the housing market is overheated – a situation that could be worsened by the Treasury's Help to Buy scheme. "There's been a huge fall-off in mortgage applications and turnover in the housing market and at the same time, in the south, you have a much faster rise in prices, while in the north some areas prices have fallen 40%. So it's a very, very difficult judgment to make.” Read more on the Guardian website.

Property Speculation Tax to Prevent Housing Bubble

The government should introduce a property speculation tax to stabilise the market and prevent another housing bubble, according to a new report. Published by think tank the Smith Institute, ‘The Case for a Property Speculation Tax’, which highlights the speculative activity driven in high demand areas by overseas investment, argues that the government urgently needs to consider preventative action to curb excessive volatility in the property market. The report warns that a housing bubble would not only worsen the housing crisis but also threaten the economic recovery. Read more on 24dash.

Clegg and Alexander Reject Cable's Warning over Help to Buy

Nick Clegg and Danny Alexander have dismissed a call by their Liberal Democrat colleague Vince Cable to restrict the second phase of the government's Help to Buy mortgage scheme to areas of the country with depressed property prices. In a sign of tensions over the economic policy at senior levels of the party, Clegg and his close ally Alexander rejected Cable's warnings that Britain was facing a dangerous housing bubble. The differences between the most senior Lib Dem members of the cabinet may complicate Clegg's plans to see off calls from the left of the party for a more distinctive Lib Dem approach to the economy.   Read more on the Guardian website. 

How the Government Could Backtrack From Help to Buy

The Help to Buy mortgage scheme has proved controversial since the moment the plans were unveiled. In calling for a rethink, Vince Cable contributed the most damaging criticism so far.  “We don't want a new housing bubble," he told Sky News.  That is the primary concern of critics. The Government appears hell-bent on boosting house prices. Barratt Homes have said the average selling price of one of their homes is up 9pc on a year ago and the chief executive of Barclays raised his concern about a "property-driven boom". Meanwhile the boom in buy-to-let rolls on, with lending up by a nearly third on a year ago.  If the trends continue, and prices rises accelerate, the question for the Government will be how to backtrack from Help to Buy, without the embarrassment of cancelling it.  That would not be difficult. The 15pc of the mortgage the Government is willing to guarantee could be reduced. Offer less and the impact on the market - and risk to taxpayers - is greatly reduced. Read more on the Daily Telegraph website.

Bank Warned That Help to Buy May Be Stoking Housing Bubble

The Bank of England has been warned that the Government’s subsidised mortgage scheme has already started to drive up house prices due to a shortage of properties for sale.  In its monthly agents report, its main source of economic behaviour on the ground across the UK, the Bank said: “The Help to Buy scheme was said to be boosting demand in the market for existing homes, by raising expectations of future house prices. Buy-to-let investors had remained highly active. On the supply side, a shortage of properties for sale was said by estate agents to be restraining transaction volumes and to be putting upwards pressure on house prices.” House prices have already started accelerating. Read more on the Daily Telegraph website.

Housing Market Has Turned a Corner

The housing market has "turned a corner", partly because of the Help to Buy scheme, the government has claimed.  Figures show that the housing stimulus programme in England has attracted 10,000 successful applications since it was launched in April.  However, last month the Institute of Directors described the extension of the scheme as "very dangerous" because it could drive up prices.  Business Secretary Vince Cable said he was "worried" about the potential of "another housing bubble".  Read more on the BBC website.

BoE Won't Let Help to Buy Fuel Housing Bubble

The new Bank of England Governor has pledged that the Bank will bring the Help to Buy scheme to an end if it threatens to create a housing bubble. Mark Carney said he and the Financial Policy Committee would not extend the scheme beyond its initial three-year period if it started to threaten the stability of the economy.  The statement is doubly significant since George Osborne has given the Bank the responsibility to switch off or extend the scheme, under which the Treasury will help fund a portion of homebuyers’ deposits.  The Governor’s comments came as he unveiled his new policy of “forward guidance”, under which the Bank will pre-commit to fixing interest rates until unemployment drops beneath 7%. He said he would not allow it, or Help to Buy, to fuel a housing bubble. Read more on the Sky News website.