'HPI should be capped at 5%' - RICS

ILW

wotsthat wrote: »

They'll benefit even more as credit controls will effectively remove potential buyers from the market.

We've been watching this exact scenario play out for the last few years.

Which would lead to the conclusion that the best mechanism is interest rates. Sadly Carney has backed himself into a corner over that one.

wotsthat

ILW wrote: »

Which would lead to the conclusion that the best mechanism is interest rates. Sadly Carney has backed himself into a corner over that one.

If you think house prices are only a function of credit availability & cost then I can see how that conclusion might be reached.

I think we should build more houses and allow people to borrow to finance them.

michaels

Graham_Devon wrote: »

Good stuff.



How can anyone suggest that's a bad thing!?

While they are at it they should also cap house price falls at 5% pa...financial illiteracy taken to new heights (lows?)

CLAPTON

The BoE toolkit is a bit limited

-it can increase interest rates but that affects the whole country and is unlikely to happen in the short term (until unemployment falls to 7%) and the next election

-it can change capital ratios for the banks but again that could affect all sectors

-it can't determine loan to earning ratios formally as it doesn't have the power; but unofficially maybe it does.

- it can't increase supply as most of the supply constraints are direct government policy outside the bank remit.

So in my view he is sending a 'signal' to the banking sector not to lend to much (whatever that means )

Loughton_Monkey

I am reminded of how bureaucratic interference into a free market tends to work. Specifically look at cars, where our infinitely wise bureaucrats decided that car manufactures must reduce the average carbon emissions of the cars they make. The car industry responded by producing equally 'inefficient' cars, but with a smaller engine size, hence lowering the 'average'. Hence the Smart Car...

If we ensure that builders only build the tiniest, cheapest-quality, 1-bed flats at £80K a pop, we can have that average house price trending down quite nicely......

chucky

michaels wrote: »

While they are at it they should also cap house price falls at 5% pa...financial illiteracy taken to new heights (lows?)

No, no you can't do that. It wouldn't be fair...

CLAPTON

wotsthat wrote: »

They'll benefit even more as credit controls will effectively remove potential buyers from the market.

We've been watching this exact scenario play out for the last few years.

What matter here is the relative peeking order

If there is a loan to income cap then indeed people will be able to borrow less.
that will reduce house prices
however the 'relative' position of the rich will remain.. I don't see why the relativity changes

mystic_trev

Mr Brown said: "I will not allow house prices to get out of control and put at risk the sustainability of the future."

What happened next?

:rotfl::rotfl::rotfl:

Loughton_Monkey

mystic_trev wrote: »

What happened next?

:rotfl::rotfl::rotfl:

Boom Boom..... Bust

CLAPTON

mystic_trev wrote: »

What happened next?

:rotfl::rotfl::rotfl:

what happened next was that the US government encouraged Freddie and Fanny to lend lots and lots of money to very poor people who had no realistic way of repaying the money

the banks 'securitised' these bad debts

this led to the banking sector freezing up as no-one then 'trusted' the valuations of the securitised assets so won't lend.

UK banks played in this playing field (RBS) and made many still commercial loans on UK property (HBOS)

others depended for their funding on the inter bank market


the UK then had a banking crisis and mortgage lending virtually stopped.

I'm not sure high residential property prices had much to do with it.