Housing market continues to hot up

Scott Woods.
Scott Woods.
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Money Matters by Scott Woods

The Governor of the Bank of England, Mark Carney, has warned that rapid increases in house prices and mortgage lending pose the biggest current risk to the UK economy.

Mr Carney also revealed that the Government has approached the Bank about changing the terms of its Help to Buy scheme.

In a recent interview, Mr Carney said there were “deep, deep problems” in the housing market, highlighting the supply shortages that have sent prices rocketing.

“The issue around the UK housing market is that there are not sufficient numbers of houses being built,” Mr Carney said.

There was also a warning from Mr Carney that the Bank was not in a position to fix the problem.

“We are not going to build a single house at the Bank of England – we can’t influence that,” Mr Carney said.

The Governor admitted concern about the increase in mortgage debt being taken on, but also admitted the Bank can only influence whether UK lenders are sufficiently capitalised against the risk being assumed in the housing market.

Mr Carney said: “The biggest risk to financial stability, and therefore the durability of the expansion, centres on the housing market and that’s why we’re focused on that.”

Government initiatives such as Help to Buy and Funding for Lending, now closed for mortgage lending, have increased the availability of mortgage finance.

As a result, first-time buyers, as well as movers, have been returning to the market at the fastest rate since before the banking crisis in 2008, pushing house prices up.

According to Nationwide Building Society, house prices in April went up by 10.9 per cent year-on-year.

In March, Chancellor George Osborne pledged in his Budget speech to “get Britain building again”, with industry analysts calling for at least 200,000 new homes to be built per year to meet current demands.