UK Mortgage Applications Fall Slightly
The British Bankers Association have released details of the Mortgage Approval figures for the month of May, at 41.8k these are slightly below the April figure of 42.2k but ahead of the market consensus estimate of 41.3k.
Overheating in the British housing sector is becoming a serious risk to the nations stellar economic recovery. House price growth is now averaging over ten percent annually, when the moderate house price growth being experienced by the regions outside the capital is stripped out then it becomes obvious that there is major upward pressure on property prices in the affluent south east of the country.
This poses a conundrum for the Bank of England (BoE), there is an urgent need to cool property price growth in one area of the economy while leaving enough leeway for other areas to catch up. Any blanket policy action by the Bank is at this stage likely to damage more fragile areas of the economy and this would be a very undesirable side effect.
Although we will find out more on Thursday when the Bank’s relatively new Financial Policy Committee (FPC) reports on the outcome of last week’s quarterly meeting. It is at this stage being rumored that the FPC will engage a serious of measures aimed at controlling the housing market. The FPC has a range of macroprudential tools that can be more finely focused than those of it’s sister Monetary Policy Committee.
The obvious difference in property prices between the affluent south east and the rest of the UK is the range in which they trade. Choosing this differentiating route would enable the FPC to impose progressively tighter mortgage guidelines on applications for higher value mortgages, this should have the effect of imposing a dampening effect on the higher end of the market while leaving the lower end largely unaffected.
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