The Financial Policy Committee concluded that it would remains "Vigilant to potential emerging vulnerabilities,"
If the FPC does begin to see the emergence of a dangerously inflated market then it could force changes in banks lending criteria, regarding deposit amounts and affordability multiples.
Read the full FPC statement here
Search the whole BTL mortgage market free
On the same day as this was posted, David Cameron announced that his scheme to guarantee 95% mortgages was being brought forward.
ReplyDeleteHe denied that this would contribute to a house price bubble, saying that people can't afford to get on the property ladder.
Does he even know what a house price bubble is? Can he not see that the fact that people can't afford to buy houses is evidence of a just such a price bubble?
The FPC base their interest rate deliberations on CPI, which doesn't include mortgage payments, so conveniently excludes house price inflation. They are therefore unlikely to raise interest rates because of house prices rising.
So it is very likely that house prices will continue to rise. The last thing this Government wants is millions of people defaulting because they can't afford their mortgages and being left with negative equity. That would be disastrous for the economy.
Their dilemma is that they desperately want to increase interest rates. The solution they favour is to continue to fuel house price inflation. This gives them the best of both worlds. Defaulters will not go into negative equity, so their properties can be sold to repay their debts.
Apart from the people who have their homes repossessed, everyone's happy. Until the next downturn that is, which will inevitably follow muddle-headed policies like these.
As you say 'anonymous' there is a depressing predictability about the situation, but it seems that house price inflation is all that Governments have to keeps this country afloat. Labour relied on it and now so to the Conservatives - for now.
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