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13/09/2013
BoE Should Limit House Price Inflation - RICS
The Bank of England's Financial Policy Committee should consider limiting annual house price inflation to 5% in order to prevent another housing bubble, reckless bank lending and a dangerous build up in household debt, according to new Royal Institute of Chartered Surveyors (RICS) research launched today.
With excessive price growth and high mortgage lending having led to a vulnerable banking sector, specific policy on limiting growth is needed. Such a policy could be implemented with caps on elements such as loan-to-value ratios, loan-to-income ratios, and mortgage durations, or imposing ceilings on the amount banks are permitted to lend, should prices exceed a given limit.
Sending a clear and simple statement to the public that the Bank of England will not tolerate house price rises above 5% would help restrict excessive price expectations across the country. This policy would discourage households from taking on excessive debt out of fear of missing out on a price boom, and discourage lenders from rushing to relax their lending standards as they compete for market share.
Joshua Miller, RICS Senior Economist at the RICS, said: "The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, five percent is one way of doing this.
"This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt."
(CD)
With excessive price growth and high mortgage lending having led to a vulnerable banking sector, specific policy on limiting growth is needed. Such a policy could be implemented with caps on elements such as loan-to-value ratios, loan-to-income ratios, and mortgage durations, or imposing ceilings on the amount banks are permitted to lend, should prices exceed a given limit.
Sending a clear and simple statement to the public that the Bank of England will not tolerate house price rises above 5% would help restrict excessive price expectations across the country. This policy would discourage households from taking on excessive debt out of fear of missing out on a price boom, and discourage lenders from rushing to relax their lending standards as they compete for market share.
Joshua Miller, RICS Senior Economist at the RICS, said: "The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, five percent is one way of doing this.
"This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt."
(CD)
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UK annual house price inflation in June 2007 was 12.1%, up from 10.8% in May 2007. Annual house price inflation in London was 17.5% in June, up from 14.3% in May. The UK annual house price inflation rate for the 3 months to June was 11.3% and 15.1% in London. The UK house price inflation rate rose from 10.8% in May 2007 to 12.1% in June 2007.
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Fall in house prices reported
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Halifax announces surprise rise in house prices
The Halifax have announced that UK house prices rose by 1.1% in December, in spite of recent evidence which showed that the housing market in the UK is slowing down. The report concluded that there were "continuing signs of a genuine slowdown in the housing market". The Halifax stated that house prices in the final quarter of 2004 were only 0.
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According to the Nationwide, UK house prices increased by 0.3% in June. The building society said the results were helped by the Government's Funding for Lending Scheme and improving job prospects. The annual rate of price growth jumped to 1.9%, its fastest rate since September 2010, bringing the average cost of a house to £168, 941.
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House price inflation drops
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House price inflation drops
Annual house price inflation dropped again in October, according to the latest figures from the Office of the Deputy Prime Minister. House price inflation was 2.2% in October, a fall from September’s figure of 3.3%. The ODPM reported that the average house price in the UK was £186,103 in October, compared with £186,755 in September.
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