On this article by Reuters on September 13th, 2013 surveyors suggest
that to prevent another property bubble the bank should cap annual house
prices to 5%.
(Reuters) - The
Royal Institution of Chartered Surveyors has called on the Bank to limit
annual house price inflation to 5 percent to prevent another property
bubble.
Such a policy, it says, could
be implemented by imposing caps on loan-to-value ratios, loan-to-income
ratios, or ceilings on the amount banks are permitted to lend.
The
request - an unusual one from an industry group that typically benefits
from rising prices - comes months before the government begins to offer
mortgage guarantees to riskier homebuyers under its controversial "Help
to Buy" scheme.
Property prices are already rising at more
than 5 percent a year according to mortgage lender Halifax, and the RICS
has joined a chorus of voices warning that price rises could become
unsustainable.
Figures from LSL/Acadametrics on Friday showed a 30 percent rise in the number of first-time buyers.
"Sending
a clear and simple statement to the public that the Bank will not
tolerate house price rises above five percent would help restrict
excessive price expectations across the country," the RICS report said.
"This
policy would discourage households from taking on excessive debt out of
fear of missing out on a price boom, and discourage lenders from
rushing to relax their lending standards as they compete for market
share."
The industry group notes
that limits on property price inflation have been used by a variety of
countries, including Canada between 2008 and 2012, when Bank Governor
Mark Carney headed the country's central bank.
Under
Carney's watch, Canada's national regulator the amount buyers could
borrow in relation to their deposit and imposed more stringent credit
checks - measures that appeared successful in bringing price inflation
back down.
At a hearing before lawmakers on Thursday, Carney said that although Britain's central bank lacked formal powers to force banks to do the same, it could issue strong advice that they rein back lending.
However
so far the Bank has not identified a bubble in house prices. Its
Financial Policy Committee is charged with spotting risks building up
the financial sector and acting to head them off.
(Reporting by Christina Fincher; editing by Ron Askew)
Article Source: http://uk.reuters.com/article/2013/09/13/uk-britain-housing-idUKBRE98B1BC20130913
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