The Bank of England has given its clearest warning yet of another housing market crash.
Deputy governor Sir Jon Cunliffe said the housing market could have a “soft landing” but warned that “other outcomes are very possible”.
He said Britain had a history of housing market booms turning to busts: “This is a movie that has been seen more than once in the UK.”
He said there was a risk of a “major overshoot in prices and build-up in debt, followed by a sharp correction with negative equity.
“Unfortunately, there are more precedents in the UK for periods of a rapidly growing housing market to end in this way.”
Cunliffe said that the decision about what to do about the growing momentum in the housing market would be the top priority for the Bank’s Financial Policy Committee.
He said the FPC would be “both vigilant and ready to act”, but he thought that the Mortgage Market Review – with its strict requirements on screening mortgage applicants – could act as a brake.
Cunliffe was speaking after the Bank of England announced that it would introduce tough stress-tests for lenders to ensure that they could withstand a 35% drop in house prices.
* Mortgage approvals in the UK fell for a second consecutive month in March, according to the Bank of England.
The number of mortgages approved was 67,135, down from 69,592 in February. In total, mortgage approvals fell by 11.9% in February and March – possibly ahead of the Mortgage Market Review.
Approvals peaked at 133,000 a month in November 2003.
How Matt sees it in the Telegraph:
Comments (9)
The propety market can not be dumbed down, it is very simple; supply and demand. Anyway Mr Hendry unlike you I did as requested so invite you to post all you have on the front page where you can get the attention you crave.
Oh lions of the night, you have had plenty of invitations to break cover and to engage in a fair and proper debate on this issue. I have called for a face-to-face debate several times but so far you have been unprepared to show.
Yet, you have continued to 'dumb down' these issues using negative rhetoric to argue that there is no problem with the housing market – or with the estate agents that service it. You only have to read the newspapers to see that there clearly is!
I invite you to comment on the "Property drought is getting worse, says RICS" article and provide your advice to them as to what's ought to be done, as they appear to be undecided.
Here's a perfect opportunity for you to contribute your thoughts and advice and I will be happy to read this.
"I hope Sir Jon Cunliffe reads these columns and if he does, I would ask him to…"
What? You mean you haven't written to him, Mr Hendry? Why leave HIM out – you've lobbied the NAEA, the RICS, ALL of the major corporate and independent Estate Agencies, the current Government, the previous Government with your ideas- and that's only the list you have so far volunteered.
Sir Jon will be feeling well left out, no doubt.
Or… just lucky to have so far escaped.
Oh – and sorry (…not…) to see that ampersat has you comprehensively deflated before you even start with your latest torrent of MDT.
Genuinely Peebee I was fully prepared for the debate. Despite the slightly Nilsenesque invitation back to his I thought we could discuss the point he raised about the story and others would join in.
I and it seems the whole world is at a loss about a bear riposte, it only has 5 google entries and non seem to relate to much at all.
Mr Hendry sets himself up as a mentor and an educator but when I put my hand up in front of the whole class and say "please sir" I am ignored.
Hi ampersat.
I was sincerely looking forward to your debate with the enigmatic Mr Hendry. He has never – repeat, never – stood toe-to-toe with a single poster in what now runs into over four years of taunts to those in the industry. I seem to remember you trying (at least) once before to engage in a reasoned debate with him on the other site. Unfortunately this was met with his usual evasiveness and the second you didn't cow-tow to his preachings you were dismissed, as are all who challenge his argument.
It is a real shame that such an obviously educated and experienced individual resorts to such petulant behaviour. If there ever was a 'point' to his rantings, then it is lost with his inability to carry it forward in adult manner.
But he is one leopard that certainly won't – or can't – change his spots in that respect.
What is a bear riposte and what case are you resting?
This 'bear' riposte alone, leads me to the conditioned conclusion which says, "I rest my case".
[If you don't believe me folks, please read todays papers, The Telegraph, The Times, The FT, The i, The Daily Mail, The Daily Express, to name a few.
They are all writing concerning articles about the state of the UK housing market and the comments they are receiving are most compelling.]
Mr Hendry, with every respect to the new look you and moniker.
It is down to you to bring your discussion and point of view to the PIE audience and not keep inviting them back to your place. This is the place for the discussion and it takes a lot of effort and understanding to debate the various subjects with little or no control of what will be posted by those who to agree or disagree with the points you raise. If you are not up to the debate why start it?
Sir John Cunliffe doesn't need to widen policy to scrutinise the housing market. When interest rate rise as they should have done in March when his boss said they would (unemployment rates down to 7%), many people will reap the rewards of an over extended mortgage and exaggerated property prices. Being greedy and hanging out just that bit too long might deliver the sort of crash dished out in August 2008 when double MIRAS relief was scrapped.
The debate is here Mr Hendry, you started it, carry on or stop but I have no intention of going anywhere to see your blog.
I hope Sir Jon Cunliffe reads these columns and if he does, I would ask him to widen the scope of the Bank’s Financial Policy Committee to encompass scrutinising current house marketing methods in this country, which need bringing into the 21st Century.
Many commentators reading these columns will know precisely what I am talking about but I would be happy to be invited to explain to those who don't fully understand the problems. (This simply cannot be done by taking and answering blog questions by the way.)
Just trying to rely on tougher stress-tests for lenders and/or on stricter requirements when screening mortgage applicants won't be a sufficient brake on the surging house prices that have currently manifested because both have been tried before and neither have worked.
A new approach is required and anyone interested in my proposals may search for them online or contact propertyindustryeye and be referred.