Red hot London property market needs ‘special measures’ to cool it

27th June 2014


The government may have capped the loan-to-income ratio for mortgage lending but Brian Murphy of Mortgage Advice Bureau said ‘special measures’ are still needed to cool the London property boom.

Figures from the Land Registry show house prices in England and Wales increased 0.4% between April and May and over the year to May have risen 6.7%. The average house price is now valued at £172,035 which is still below the November 2007 peak of £181,518.

House prices may be up on the whole but half of regions actually witnessed a fall in prices in May, including West Midlands (-0.1%), Wales (-0.2%), North East (-0.3%), North West (-0.5%) and Yorkshire and Humberside (-0.9%).

At the other end of the spectrum London house prices are continuing on an unstoppable rise, gaining 2.5% in April equating to an 18.5% rise over the year.

While the government yesterday introduced new measures to try and control house price growth, by telling lenders no more than 15% of their lending can be on mortgages with loan-to-income multiples of 4.5 and above and stress testing affordability at higher interest rates, Murphy said this would not slow the London market but push homeownership further out of reach for many in the capital.

‘London remains a unique case in need of special measures and Londoners will be the first to see the effect of moves by the Bank of England to ration high loan-to-income mortgages – unless, of course they are among the cash buyers, foreign owners and buy-to-let landlords who do not rely on mortgage finance but are still a major influence on rising prices,’ he said.

‘It is encouraging that the Bank is still willing to allow a limited supply of high loan-to-interest mortgages, which are needed in some circumstances and are safely covered by rigorous affordability checks.  To balance the equation, we now need to remove the shackles from builders and developers so that housing supply can catch up.’



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