Mortgage Blog: Curbing London market could lead to consequences for the rest of the country
One of the UK's biggest lenders has warned that attempts to restrict mortgage lending to try and prevent a London property bubble could have ‘unintended consequences' for the rest of the country.
The Nationwide building society believe that concerns about rising house prices have been exaggerated and that any plans to further toughen the mortgage application process could have serious repercussions outside the capital. Keep reading to find out more.
Stricter mortgage rules could ‘choke off' economic recovery
With the Governor of the Bank of England increasingly concerned about rising house prices, many experts expect the Bank of England's Financial Policy Committee (FPC) to shortly introduce new measures to subdue lending. These may include additional affordability checks for homeowners.
However, Mark Rennison, finance director at the Nationwide, played down concerns about spiralling house prices and said that the current situation did not warrant changes to the Government's Help to Buy scheme. He said that the Bank "are obviously considering what they might need to do" but warned that further measures to subdue lending could choke off an economic recovery in the regions. "If you take a position to cool the London market you can have unintended consequences in places like the North East," he said. "I don't sense they believe that's necessary at present."
Nationwide group director Alison Robb added "If you want to tackle a problem that exists in London, then a policy is required that focuses on London as opposed to the entire country. There are parts of the country that are only just beginning to enjoy their share of the boom and there is no reason to stop that."
Expert believes more localised policies could work better
Keith Osborne, editor of new homes portal whathouse.co.uk, said: "House prices are rising by more than twice the amount in London as they are in the rest of the country. General measures to restrict mortgage lending may have the effect of cooling the property market in the capital but it could have an adverse effect elsewhere in the country."
"A better idea may be to use the approach adopted recently by Lloyds. The banking group have capped income multiples to four times income for borrowers wanting a mortgage over £500,000 as wages were not keeping pace with house price growth in London. This is a measure that's mainly targeted at the overheating London market without subduing lending elsewhere in the country