Carney: UK Housing Market Has 'Deep Problems'

Carney: UK Housing Market Has 'Deep Problems'
Speaking to Sky News, the Bank of England Governor warns rising house prices represent the biggest current risk to the economy.

The British housing market has "deep, deep" problems, according to the Governor of the Bank of England.

In an interview with Sky's Murnaghan show to be broadcast in full on Sunday morning, Mark Carney warns that rising house prices represents the biggest current risk to the economy.

And the number of large mortgages being approved to house buyers is on the rise, he adds.

Mr Carney says that the UK is in need of new house building.

He says that compared to his home country of Canada, for example, the UK built half the number of new homes every year despite having twice the population.

Canada builds around 200,000 new homes a year compared to just 133,000 similar properties that were built in the UK last year.

Mr Carney said: "The issue around the housing market in the UK … is there are not sufficient (numbers of) houses (being) built."

Asked if more houses need to be built, Mr Carney replied: "That would help us out.

"We're not going to build a single house at the Bank of England. We can't influence that.

"What we can influence … is whether the banks are strong enough. Do they have enough capital against risk in the housing market?"

Mr Carney said they could also check lending procedures "so people can get mortgages if they can afford them but they won't if they can't".

"By reinforcing both of those we can reduce the risk that comes from a housing market that has deep, deep structural problems," he added.

Mr Carney said there was evidence that large mortgages, where lenders approve loans of more than four times people's salaries, are on the rise again.

"We don't want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term," he said.

"We'd be concerned if there was a rapid increase in high loan-to-value mortgages across the banks. We've seen that creeping up and it's something we're watching closely."

Last week, Mr Carney surprised many by playing down the chances of an imminent rise in interest rates despite fears of a growing house price bubble.

But he admitted the issue was the biggest current threat to the economy.

"The biggest risk to financial stability, and therefore to the durability of the expansion, centres on the housing market and that's why we're focused on that," he said.

Prices are currently rising at more than 10% a year across the country.

Analysis by Sky News has shown the number of £1m properties has doubled since 2008.

Earlier this month, the OECD think tank called on the Bank of England to impose measures to help quell rising house prices.

Both the coalition and Labour are committed to building hundreds of thousands of new homes.

However, construction still lags behind Government targets.

http://news.sky.com/story/1263732/carney-uk-housing-market-has-deep-problems

The housing market is heading for a fall, fast. Pretty soon the only people who will be able to buy in London will be millionaires. A one bedroom flat in Brixton is going for £449,000 (http://www.theguardian.com/money/2014/may/16/uk-house-prices-tale-two-streets-carney-yorkshire-london-bank-england) and that is classed as normal. Average house prices stand at £250,000. Averages wage stands at £26,500. It simply does not compute!

I just hope that people don't end up with the negative equity that saw so many people lose their homes back in the 80s when the housing market crashed.

Irn Bru wrote:I just hope that people don't end up with the negative equity that saw so many people lose their homes back in the 80s when the housing market crashed.

Why would they lose their homes?

Irn Bru wrote:I just hope that people don't end up with the negative equity that saw so many people lose their homes back in the 80s when the housing market crashed.

Because so many people are forced into renting, landlords with substandard properties are making a fortune, the choices are so limited. The whole situation is crazy. There are so many sites within cities and in suburbs that are run down and could be compulsory purchased and revamped, but in London in particular they are being snapped up by developers and left until they can make a fortune selling them on. Somebody has to take the bull by the horns and say enough is enough. Of course, it is making the economy look better at the moment, something that Osborne was very well aware of when he brought in the Government sponsored buying scheme. It has make prices go up much faster than they would have done, but what does he care, it achieved the aim of making it look as if the economy is in a better state than it really is.

Raggamuffin wrote:

Irn Bru wrote:I just hope that people don't end up with the negative equity that saw so many people lose their homes back in the 80s when the housing market crashed.

Why would they lose their homes?

Because they have had to take out very large mortgages. At the moment, the interest rate is extremely low, but Carney has said that it is going to have to start going up. When it does, their repayments will sky rocket and many will not be able to afford to pay them. It happens every time.

well if we need 200,000 new homes I hope the build em all round didges way....He can have em all....and the occupants    he seems to think we have "plenty" of green space to waste

They're building 2 new housing estates on green belt land in my area. Not happy   In one local field, planning applications for a barn were turned down by the Local council 5 years ago, now they are building 60 new houses on it. Palms are being greased somewhere   

I see some on the right are whining about houses being built on green belt land and yet at the very same time they then get overexcited at the prospect of all the profit available from fracking.

Of course if the milk snatch had replaced the houses she sold off with new stock, then the availability would be much higher and house prices would be lower due to that availability.

And then there's the fact that many overseas investors are pumping large amounts of capital into the buy to rent sector, thus encouraging a greater amount of greed.

There's plenty of room for more housing development so that young people can get on the housing ladder, some of the financing for this can come from a massive tax rise on second homes and those who wish to operate as parasites by purchasing houses to earn income from rent.

Sassy wrote:

Raggamuffin wrote:

Why would they lose their homes?

Because they have had to take out very large mortgages.   At the moment, the interest rate is extremely low, but Carney has said that it is going to have to start going up.   When it does, their repayments will sky rocket and many will not be able to afford to pay them.   It happens every time.

You mean that the people who are in negative equity are also the ones who couldn't really afford the mortgage in the first place? I suppose that makes sense, although if there's a large drop in house prices, those who didn't have huge mortgages could end up in negative equity. They wouldn't lose their home if they keep up the payments though.

Now, what did BigAndy9 say when the floods were going on?

Wait 6 months and they'll be talking about building more and more houses to house the foreigners - that's what he said!

Anyway, as for house prices - the only problem there is London - ok, BigAndy9 has a solution - put a great big tax on any foreigner who wants to buy - put that on stamp duty, then tax the profit made on all houses in London.

The rest of England should not suffer any measures the government or Bank of England use to sort out the mess of foreigners and filthy rich Englishmen (those living in London)!

Those "rich" people in London could only buy houses for so much money if the sellers agree though. If it all goes wrong, I won't mind - I could buy a nice little house if the prices drop.