Shortly the Government of the UK will announce plans for the Bank of England to assume powers to be in command of banks and building societies mortgage lending conduct. The committee is proposed to be compiled of members of The Bank of England staff and the Financial Services Agency.
The plan is to act as a controlling method on lenders so that when credit is starting to become too freely obtainable they will be able to stifle the lenders facility to lend. On the other hand when lending is constrained they can take measures to open up credit more freely. This will give the Bank of England better control over money supply (which is governed by bank lending) and so more ability to control economic movement.
Had these abilities been in place over recent years then it is thought that the property market overheating, which peaked in 2007, may well have been avoided. House prices were driven to unworkable levels by the very free accessibility of mortgage loans, including considerable sub-prime lending. Buyers could lend at levels which drove prices too high.
Likewise, during the present lending famine the Bank of England will be able to persuade lending in order to support the economic sitation.
Such help will be principally important for the mortgage market. Although property prices would seem to have levelled there are nonetheless far less property sale transactions going through. The present figures, at around 45,000 per month, is about half of the long term norm and much of the difficulty appears to lie with lower mortgage availability. Anyone wanting to Sell House Fast is presently facing a demand for property at about half historical levels. So the only way to speed up that Quick Property Sale has been to significantly reduce asking prices and this is the reason behind the collapse in house prices.
This announcement therefore should be great news for the housing market. Much detail of the new powers remains to be revealed but it is to be hoped that there is extensive focus on the mortgage market. This seems probable as an easing in the availability of mortgages is not just good news for those demanding their estate agents to “Sell my Home fast”, it is also very good news for the construction companies. With unemployment likely to continue to increase for another year or so a stimulation in house building would be of benefit to the wider economy as well.
Finally, it is hoped that any mortgage lending expansion gives due attention to the first time buyer. First time buyers have been particularly affected by the mortgage famine, but they remain essential to the housing market upturn. It is hoped that the coming weeks see the expansion of new first time buyer offers which will kick start the property market recovery.
