"BoE: no action now on housing, to focus on hedge fund rate risks"

chucky

The watchdog said it was keeping a close eye on Britain's housing market which has picked up speed and raised some concerns from some external economists about the risks of a new bubble in property prices.

The FPC said the housing recovery "appeared to have gained momentum and to be broadening" but activity and loan-to-value ratios on new mortgages were below historic averages.

Interesting that despite all the jumping on band wagons by many, the BoE feel that there is no bubble in house prices at the moment despite what many people may believe.

They prefer to concentrate on more important issues in the economy.

Loughton_Monkey

Linky

http://www.bankofengland.co.uk/publications/Pages/news/2013/014.aspx

In the United Kingdom, the continued recovery of the banking sector had been associated with a further easing in credit conditions. Against that backdrop, the recovery in the housing market appeared to have gained momentum and to be broadening. Mortgage approvals in July were 30% higher than a year earlier and average house prices in August were 5% higher than a year earlier and had risen more in some parts of the country, particularly London. Nevertheless, activity in the housing market and loan-to-value ratios on new mortgage lending remained below their historic averages. Households’ debt servicing costs were low and the ratio of house prices to earnings was at its level of a decade ago. In view of that, the Committee judged that it should closely monitor developments in the housing market and banks' underwriting standards. The Committee would be vigilant to potential emerging vulnerabilities. The Committee noted that if risks to the stability of the financial system were to emerge from the housing market, both it and the microprudential regulators had a range of tools available to address those risks. These included, amongst others, supervisory guidance on underwriting standards, sectoral capital requirements and recommendations to the regulators on tightening of affordability tests. The Committee agreed that, if it became necessary to deploy its tools, they would be used in a way that was proportionate to the risks and consistent with a graduated response.

Graham_Devon

Nothing new really. They monitored the market right throughout the noughties too.

Everyone is doing the same on most parts of the economy in most parts of the western world. No one is willing to stop the party, and nothing, therefore, has changed since 2005 onwards.

On another note though, it really would be a joke to start acting on dampening the market while the government is ploughing taxpayer risk into stimulating it.

michaels

Graham_Devon wrote: »

Nothing new really. They monitored the market right throughout the noughties too.

Everyone is doing the same on most parts of the economy in most parts of the western world. No one is willing to stop the party, and nothing, therefore, has changed since 2005 onwards.

On another note though, it really would be a joke to start acting on dampening the market while the government is ploughing taxpayer risk into stimulating it.

Did they - I thought this was a whole new regulatory body with a new remit but perhaps you know otherwise?

Graham_Devon

michaels wrote: »

Did they - I thought this was a whole new regulatory body with a new remit but perhaps you know otherwise?

Jesus, could you be any more pedantic if you tried? Top marks for forumonics.

Next you'll be suggesting the NHS has never been monitored, as it's now a new body doing the monitoring.

For your amusement...."Regulatory bodies monitored the market throughout the noughties".

Happy now? The BOE is the BOE. "They" monitored the market under whatever names they decided on at the time.

michaels

Graham_Devon wrote: »

Jesus, could you be any more pedantic if you tried? Top marks for forumonics.

Next you'll be suggesting the NHS has never been monitored, as it's now a new body doing the monitoring.

OK agreed the supervisory function has just been moved but previously there was no remit to consider asset price bubbles as classical economic theory suggests both that bubbles should not exist and also that it is not possible to call a bubble even if it were to exist as markets by default price in all available information - thus I stand by my assertion that previously there was no body that monitored asset markets to look for bubble type activity. Would you care to suggest otherwise?

Graham_Devon

michaels wrote: »

OK agreed the supervisory function has just been moved but previously there was no remit to consider asset price bubbles as classical economic theory suggests both that bubbles should not exist and also that it is not possible to call a bubble even if it were to exist as markets by default price in all available information - thus I stand by my assertion that previously there was no body that monitored asset markets to look for bubble type activity. Would you care to suggest otherwise?

I would agree that they were not specifically set a task of monitoring a specifiic type of bubble.

But I would be horrified if never before have the BOE ever even thought to monitor bubbles in markets or assets.

Taking the NHS example again, there is now a directive to monitor X Y and Z in infection control. This does not mean it didn't happen before now, it's just that X Y and Z were rolled into B as one policy. So you could suggest that the NHS never monitored X before now, if you wanted to be extremely difficult. They did, however, monitor X, just not under the new policy title.

Seems to me it's just a change of wording rather than a major change in direction. If the BOE have never monitored asset price bubbles in their general regulatory overview, I would frankly be astonished.

chucky

Graham_Devon wrote: »

Nothing new really. They monitored the market right throughout the noughties too.

Everyone is doing the same on most parts of the economy in most parts of the western world. No one is willing to stop the party, and nothing, therefore, has changed since 2005 onwards.

On another note though, it really would be a joke to start acting on dampening the market while the government is ploughing taxpayer risk into stimulating it.

The real point that you missed is that the housing market is only a small area of the economy.

There are much more important issues to deal with than house prices...

grizzly1911

michaels wrote: »

exist as markets by default price in all available information -

All available information that they understand , acknowledge and actually want to take notice of.

Often there is just too much information to actually make meaningful decisions on let alone act on them.

The BOE and whatever other appended offices of authority have always regulated activity. Whether they were looking in the right places at the right time and knew what to do is open to debate.

grizzly1911

chucky wrote: »

The real point that you missed is that the housing market is only a small area of the economy.

There are much more important issues to deal with than house prices...

You are right it is only part of the economy and there are much more important issues. Surprising that so much effort goes into propping it up really, let alone debate here.

chucky

grizzly1911 wrote: »

You are right it is only part of the economy and there are much more important issues. Surprising that so much effort goes into propping it up really, let alone debate here.

I'm not sure that much is spent on "propping" up house prices when you look at what was spent to "prop" up the banks or used for QE. It's probably a fraction compared to that...