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House price latest and Help to Buy

It's been a busy few days for the puppeteers pulling the strings of the housing market. We reflect on what's been said and look at latest ONS housing data out today

May 20, 2014

UK house prices rose by 8% in the year to the end of March

Data released today by the Office for National Statistics (ONS) shows that while UK house prices slowed in March they were still up 8% on a year ago and, unsurprisingly,  increases in London continued to lead the way with the annual property price increase in London standing at 17%.

The ONS said that excluding London and the south east, house prices increased by 4.7% over the year to March 2014.

House price inflation in the capital was followed by the east of England at 6.6% and the south-east at 6.1%. It was slowest in the north-west at 3.1%, Scotland at 0.8% and Northern Ireland at 0.3%, according to the ONS regional breakdown.

In March 2014, prices paid by first-time buyers were 10.0% higher on average than in March 2013.

Mark Carney says housing market “biggest risk” to recovery 

This data release follows a warning at the weekend from the Bank of England governor, Mark Carney, that the housing market posed the biggest risk to Britain’s economic recovery as a shortage of new homes drives up prices.

Speaking on Sky News, he said the Bank of England was watching to ensure that banks had enough reserves to withstand the risks of bad loans should the housing market suffer a downturn.

It was also checking lending procedures to try to ensure that mortgages were only issued to people who could afford them.

“By reinforcing both of those we can reduce the risk that comes from a housing market that has deep, deep structural problems,” he said.

“We would be concerned if there were a rapid increase in high loan-to-value mortgages across the banks … we have seen that creeping up and it is something we are watching closely. The level of higher loan-to-income mortgages, ones above four and a half, five times loan-to-income, potentially could store up bigger problems for the future and we need to be careful.”

Carney said the central bank was unable to solve the shortage of new houses. At 123,000 units per year, housebuilding remains well below the 200,000 many economists consider to be the minimum needed.

“We’re not going to build a single house at the Bank of England and we can’t influence that,” Carney said. He said the rate of homebuilding was half that in his own country, Canada, despite the UK having double the population.

David Cameron “Mark Carney is free to act”

David Cameron responded to Carney’s comments by saying “We have given the Bank of England the duty to make sure that bubbles are dealt with in the economy. They have all the powers they need to do that,” he said.

He went further this morning, saying that he would be prepared to amend the government’s Help to Buy scheme if Mark Carney recommends a change of approach. Cameron said  “We will consider any changes that are proposed by Mark Carney. But as he said, this is a well-targeted scheme and it has helped tens of thousands of people to get on the housing ladder and have mortgages.”

Paula Higgins, Chief Executive of the HomeOwners Alliance commented today that “Our HomeOwners Survey shows worries about high house prices and the shortage of housing have become a national issue.”

‘The surge in house prices this past year is not welcome news in the capital and it is a growing worry in other parts of the country, particularly for those hoping to buy their first home.

She added: “We have to hope Mark Carney and David Cameron are in regular contact, exploring serious options for creating a sustainable housing market and ways to get house builders building, rather than just batting these issues around on national TV and Radio.”

 

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