The Governor of the Bank of England has warned homeowners against relying on property prices rising to pay off debt if they can no longer afford them when interest rates rise
Mark Carney said he was less concerned
about the housing market now that the Bank of England has pulled the
Funding for Lending for mortgages. Photo: REUTERS/Toby Melville
Mark Carney has warned home-owners not to take out big mortgages that they
will not be able to afford when interest rates start to rise.
The Governor of the Bank of England said those looking for a home could not
simply rely on the price of their house rising to pay off the debt and had
to think if they would be able to pay their mortgage five or 10 years from
now.
“Are you counting, even subconsciously, on the price of your house keeping
going up and if something happens an ability to sell it quickly and not
facing the consequences of not being able to pay?,” he told the Guardian.
Earlier this week the central bank withdrew its support package for mortgage
lending, warning that rising house prices could derail the UK’s recovery.
Funding for Lending Scheme (FLS) – which allows lenders to borrow at
rock-bottom rates in exchange for providing loans – will not apply to
household lending from February next year.
Following that decision, Mr Carney said he was now “less concerned” about the
housing market.
He said: "The right way to do policy – to protect against the boom and bust cycles – is to act early in a graduated, proportionate way and that reduces the probability of having to act in a bigger way later."
His warning comes as the Nationwide Building Society’s latest housing data showed prices rose 0.6pc on a month-on-month basis in November, with annual growth at 6.5pc. This was the biggest annual rise since since July 2010, and means the average house price is just 6pc below the all-time high.
Resurgent property values have raised fears of another housing bubble, caused in part by the Help to Buy scheme, which provides Government subsidies on loans for borrowers with small deposits. However, economists said it was too early to gauge the impact of Help to Buy.
He said: "The right way to do policy – to protect against the boom and bust cycles – is to act early in a graduated, proportionate way and that reduces the probability of having to act in a bigger way later."
His warning comes as the Nationwide Building Society’s latest housing data showed prices rose 0.6pc on a month-on-month basis in November, with annual growth at 6.5pc. This was the biggest annual rise since since July 2010, and means the average house price is just 6pc below the all-time high.
Resurgent property values have raised fears of another housing bubble, caused in part by the Help to Buy scheme, which provides Government subsidies on loans for borrowers with small deposits. However, economists said it was too early to gauge the impact of Help to Buy.
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