IMF also Warns UK on Housing Bubble

The IMF also Warns UK on Housing Bubble.

The International Monetary Fund has gathered behind the European Commission in also suggesting that the UK needs to take action to prevent another housing bubble that directly affects our economy.

The IMF's yearly review and report of the UK economy suggests that whilst strong economic growth is still expected in the UK for both 2014 and 2015, one of the biggest threats is the countries reliance on property and our exposure to changes in our economy, wealth and susceptibility to rising interest rates and falling income.

The IMF even went one stage further by suggesting that both the UK Government, the Bank of England and UK regulators i.e. the Financial Conduct Authoriity and the Prudential Regulatory Authority (that part of the Bank of England that manages banks) should take steady, gradual action to slow the property market down.

Comment

We have to say we agree. But as ever there is a conflct of interest.

Government needs State owned banks to reduce toxic mortgage debt and the only way to do this is to let the property market run.

Interest rates should rise, banks should be capped on the amount they lend.  Indeed in the last week both Lloyds Bank and Natwest Bank have confirmed lending cap restrictions to loans over £500,000 to no more than four times income.

In addition, the Financial Conduct Authority (FCA) put in force the Mortgage Market Review (MMR) upping the requirements on suitability and affordability assessments for borrowers when applying for a mortgage to ensure that people can still afford their mortgage not just today but in the future if interest rates rise and incomes fall.

The only things we can see that have not happened so far are interest rates being increased and the Government paring back its Help to Buy scheme.

We expect steady action over the course of teh next six months to take some of the heat out of the property market, but not all the heat.  Property prices will rise but maybe at a slower rate as we cross over to 2015 and then 2016.

The IMF warning is one that we are all aware of but there are still some parts of the country, despite record house prices overall, that are still on negative equity and have not experienced the property demand and price rises of London and the South East.