26 Jun 2014

The Bank of Zero

The Bank of England is so worried about the financial risk rising from roaring house prices that it has decided to do, er, nothing.

It is forcing banks to stress-test future mortgage loans, measuring how you would cope with interest rates around 3 per cent higher. But banks are already doing this.

It is forcing banks to limit the number of mortgages lent at 4.5 x income to 15 per cent of the total. But no bank is currently lending more than 11 per cent.

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The bank is also setting a new “capital buffer” to guard against boom and bust. The buffer has been set at zero. Yes zero.

What this means: it will be no harder to get a mortgage tomorrow than it is today, but if prices rise and incomes don’t, eventually these rules will choke off the excess. The bank’s central scenario is 20 per cent house price rise by 2017.

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4 reader comments

  1. Spike says:

    Not a chance prices will rise that much in East Midlands prices are actually going down offers well under asking price are coming in for our property which is marketed under 250 stamp duty when agents value property at £275,000 so no bubbles here.

    Other vendors are telling me the same thing.
    Spoke to agents yesterday who tell me the market has gone really quiet.

  2. nickj says:

    Carney blew a house price bubble on Canada which is why Osborne hired him as a stooge here.

  3. Philip Edwards says:

    “…stress-test future mortgage loans…”

    Just when you think neocon economists can’t get any more absurd they come up with even worse bullshit jargon.

    Here’s another “stress test”: Sell “your” house (actually it belongs to the mortgage lender, but don’t let facts get in the way of myths and lies) at the going rate. Then “buy” a similar house at the going rate.

    Since you “bought” the first house inflation has increased the going rate. Hey Presto! You pay more for a similar house. Ipso fact the mortgage lenders make even more profit for doing absolutely b***** all, while you, poor sucker, fall hook, line and sinker for the mortgage scam.

    The additional stress is that you have to put more of your hard-earned into the banks so they can gamble it on the stock exchange and cause yet another economic depression. If you don’t, you can’t “buy” a house.

    Meanwhile, the Plastic Yank Carney (he’s Canadian, gedditt?) will appear at regular intervals and tell you the ripoff is all for your own good.

    But whatever you do, don’t get stressed out about it. Just cough up and learn to love Big Brother.

  4. 20thcenturymax says:

    The ‘looming’ property bubble is quintessentially a London issue. Unfortunately, because of the way the UK is structured, it causes repercussions across the rest of the country. Previously when villages across the UK have suffered from ‘ghost’ citizens, who have bought property up simply to use at weekends or for family vacations, local councils have put regulations into place to ensure that certain types of properties have been offered to locals first or at a discounted rate. Perhaps the authorities in London need to seriously look at restricting the number of properties that are purchased by foreign billionaires to use when they pop over to have a shopping spree at Harvey Nicks. The elephant in the room here is that the majority of wealthy Londoners who have the power to do anything about this tend to prefer to live in an area that is well out of the price range of any ‘plebs’! The big question is… who is Mr Carney actually here to serve? I know what I think, but I’m an old cynic!

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