Buy-to-let
Only one in three people (29 per cent) believe that now is a good time to buy a home, down from 40 per cent three months ago, according to the quarterly Property Tracker report from the Building Societies Association.
This is the lowest level since June 2008 and indicates that new mortgage lending regulations (Mortgage Market Review), affordability constraints and media scrutiny may be beginning to have a limiting effect.
House prices are now rising in all regions, but most remain under their 2007 peak. Nevertheless, 62 per cent of Londoners said there is a housing bubble in the capital and 55 per cent of people across the UK agree.
Building new homes is seen as the most effective way of curbing house price inflation. This view was particularly strong amongst first-time buyers where 40 per cent saw this as the best solution.
Bank of England intervention
Mark Carney, governor of the Bank of England, recently described the property market as the ‘biggest risk to financial stability and recovery’, and the intense focus on the housing market has resulted in the Bank announcing that they are prepared to take action to reduce activity if necessary.
If the Bank was to introduce measures to make it harder to get a mortgage, 28 per cent of first-time buyers said they would put their home buying plans on hold for the foreseeable future. Curbing Help to Buy is not seen as an effective solution – just 6 per cent of the public believe that this would work.
Comment
Paul Broadhead, head of mortgage policy at the BSA, commented: “For decades successive governments have failed to address the problem of housing supply. The launch of Help to Buy: Equity Loan just over a year ago has provided a much needed shot in the arm to the construction industry while Help to Buy: Mortgage Guarantee has had a beneficial effect on consumer confidence, but actual lending is low. There is clamour in some quarters for this scheme to be withdrawn or scaled back; in my view the impact would be negligible.
“The single biggest issue in the market remains lack of supply. The population is increasing, household sizes are falling – so there are more of them – all leading to the pressure on prices which we are seeing in varying degrees across the country. This quarter’s Property Tracker clearly shows that consumer confidence has cooled and that people are more cautious about buying.
“The Financial Policy Committee at the Bank of England, which met yesterday (17 June 2014), has a wide range of tools intended to take heat out of the market. I would urge caution as the challenges in raising a deposit and the recently introduced Mortgage Market Review regulations are beginning to have an effect to dampen demand. The Committee’s tools are untested, and could prevent people from buying for an extended period without addressing the core problem of under supply.
