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House Prices
How can growth be capped at 5% increase?
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This is not a measure aimed at individual prospective homeowners seeking a mortgage, nor is it an attempt to impose some kind of cap upon those seeking to sell their homes - rather it is a suggestion that the BoE have the power to change rules and regulations for mortgage lenders as a whole, based upon the index of house prices, with a suggestion that, say a 5% annual rise in average prices might trigger such an intervention.
"f the inflation limit was breached, Rics argues, the Bank's fledgling financial policy committee, which is in charge of safeguarding financial stability, could act.
If it believes a bubble is emerging, the FPC has the power to direct the banking regulator, the Prudential Regulation Authority, to force lenders to set aside more capital against riskier mortgages, for example, which could make high loan-to-value mortgages more expensive.
Joshua Miller, senior economist at Rics, said: "The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, 5% is one way of doing this.""
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"f the inflation limit was breached, Rics argues, the Bank's fledgling financial policy committee, which is in charge of safeguarding financial stability, could act.
If it believes a bubble is emerging, the FPC has the power to direct the banking regulator, the Prudential Regulation Authority, to force lenders to set aside more capital against riskier mortgages, for example, which could make high loan-to-value mortgages more expensive.
Joshua Miller, senior economist at Rics, said: "The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, 5% is one way of doing this.""
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@3T Ermm - what?
What part of the idea is "lunatic"?
How would it be "impossible to carry out"?
Since this is a suggestion from RICS to the BoE which is independent of the government - how is this government interference or whatever?
It should however be very much the concern of the BoE or the government come to that to manage yet another house price bubble, and very much the concern of the BoE and the government that financial institutions are properly regulated and are not seduced through greed into adopting risky lending practices which, it could be argued, precipitated the near-total collapse of the global financial sector back in 2008.
Are you sure you understand what it is that RICS were suggesting?
What part of the idea is "lunatic"?
How would it be "impossible to carry out"?
Since this is a suggestion from RICS to the BoE which is independent of the government - how is this government interference or whatever?
It should however be very much the concern of the BoE or the government come to that to manage yet another house price bubble, and very much the concern of the BoE and the government that financial institutions are properly regulated and are not seduced through greed into adopting risky lending practices which, it could be argued, precipitated the near-total collapse of the global financial sector back in 2008.
Are you sure you understand what it is that RICS were suggesting?
Well you can work out the percentage and compound it for years I guess but it's open to all sorts of abuse. It also means that if 5% is the limit then that's what it will be 5% year on year forever, prices would be sky high in a generation better to have what we have now. Governments usually come un stuck when they mess about with the financial infrastructure.
