CML downplays risk of housing bubble

CML downplays risk of housing bubble

Source: CML

The CML’s forecast came as expectations for house prices surged to their highest level in more than 14 years. The Royal Institution of Chartered Surveyors warned that without a “meaningful increase” in the supply of homes, prices and rents would become more unaffordable.

Meanwhile, the Treasury forecasters have predicted that house prices will rise by almost a fifth in the next four years.

The Bank of England last month scrapped its support package for mortgages to guard against the risk of a house price bubble.

The central bank said the Funding for Lending Scheme – which allows lenders to borrow money at low rates in exchange for providing consumers and businesses – would not apply to household lending from February next year.

Resurgent property values, which are growing at their fastest pace since before the financial crisis, have stoked fears of a housing bubble caused by cheap money and the Government’s controversial Help to Buy scheme.

But the CML has argued that the number of mortgages written under the Help to Buy Scheme are “relatively modest” and will have a smaller impact on the housing market than many commentators suggest.

“There is a possibility that too much importance has been ascribed to the impact of the Help to Buy mortgage guarantee scheme. While it brings forward a return to higher LTV lending, and so eases the position of those looking to purchase or move home under their own steam, it seems likely to directly help a relatively narrow profile of buyers, given the new regulatory regime,” CML said.

Driving the return to higher mortgage lending has been the turnaround in the maroeconomy, the CML argues, as worried about a double or trip-dip recession have dissipated and made way for a “more confident national mood”.

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