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Central bankers to announce action on housing market


Central bankers are expected to announce whether or not they will take any action to cool the UK housing market.

House prices have been rising significantly in certain areas of the country, especially in London and its surrounding areas.

This has led to Mark Carney, the governor of the Bank of England, to state that the housing market is the biggest risk to long-term economic recovery.

However, the decision to take action lies with the Bank of England’s Financial Policy Committee, who were recently been given new powers to tackle any threats to the stability of the UK economy.

Market could be slowing

Despite the housing market showing an annual prince increase of 18.7% in London, and 6.3% outside of London and the South East, some surveys have suggested the market could be cooling on its own.

These surveys have claimed that the number of mortgage approvals have dropped recently, suggesting that future sales are likely to slow down.

Additionally, some banks, such as Lloyds Banking Group, have taken action themselves to help cool the market by placing restrictions on their mortgages in order to “address inflationary pressures in the London housing market”.

Financial Policy Committee powers

The Financial Policy Committee could potentially calm the housing market by affecting the ability of potential buyers to successfully apply for a mortgage.

If the committee decides to use these powers, they could advise a cap is placed on the value of home loans in relation to either the annual income of the mortgage applicant, or the value of the house.

However, lenders have already been told to use stricter lending criteria recently, when the Mortgage Market Review rules were implemented. These rules mean that a mortgage lender now has to ‘stress test’ a mortgage applicants finances to make sure they can afford the loan, and some believe that this has already started to cool the housing market.

The committee could however, decide to make these rules even stricter. Alternatively, some believe that they could decide to scale back the Help to Buy scheme, rather than make lending criteria stricter.

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