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UK Housing Market Cools But Property Bubble Fears Remain

UK Housing Market Cools Down... For Now
Asa Bennett
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LONDON, ENGLAND - MAY 19: A woman walks past an estate agent's window display on Brompton Road in Knightsbridge on May 19, 2014 in London, England. The governor of the Bank of England, Mark Carney, has given his strongest warning yet about the dangers to Britain's economy posed by the booming housing market saying that the market represented the biggest risk to financial stability and the long-term recovery. (Photo by Rob Stothard/Getty Images)
Rob Stothard via Getty Images

Britain's housing market activity looks to be cooling as the rate of the mortgage approvals slipped to a nine-month low, but fears remain that officials will have to act to ward off a property bubble.

The Bank of England revealed that the number of mortgages approved in April fell to 62,918, marking the third fall in a row, as mortgage brokers adjust to tighter lending standards.

Samuel Tombs, UK economist at Capital Economics, told the Huffington Post UK that the figures indicated "a period of cooling, rather than a popping of a housing bubble."

Speculation is mounting that the Bank of England will step in next month to take action to cool the housing market, as house prices have continued to soar and demand remains strong. Analysts still expect house prices to increase yet further, despite the dip in mortgage approvals.

Eimear Daly, head of market Analysis at Monex Europe, said: "Although declines in mortgage approvals will be taken as welcome news that authorities are reining in the UK’s runaway housing bubble, the reality is that a large part of the boom seen in the UK housing market – particularly in London – is based on cash buyers."

"Tightening mortgage standards are ultimately useless at fighting a housing market bubble and will only temporarily slow down the sector, at the expense of ordinary borrowers."

Martin Wheatley, head of the City watchdog the Financial Conduct Authority, said on Friday that it was too early to tighten underwriting rules for home loans to cool the housing market.

“We are starting to see some slowing down,” Wheatley said. "I think we just have to monitor [the market]. It's too early to tell."

The Bank's Financial Policy Committee (FPC) could tighten the underwriting rules further, or could force banks to hold more capital in case home loans default.

The Bank could also ask the government to make changes to its mortgage guarantee scheme Help to Buy, which critics have warned would help overheat the market by boosting demand without helping the supply of new homes.

See also: 11 Reasons The Bank Of England May Be Ignoring A Housing Bubble

11 Reasons The Bank Of England May Be Ignoring A Housing Bubble
And even world snooker champions...(01 of10)
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Ronnie O'Sullivan says a huge housing bubble (and crash) will happen.Or in his words: "Baby it's coming."
Central London house prices are rising £729 per day(02 of10)
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The average price for a three-bedroom house in central London has increased by £729 a day over the last year, equivalent to a quarter of a million pounds, estate agency Marsh & Parsons said.The estate agent firm said the scale of house price inflation meant that prices rose by 19% since April 2013 to an average of £1.6 million, equivalent to £5,120 a week, or eight times Londoners' £658-a-week median salary.
Single people can't seem to afford to own a property (03 of10)
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Less than one in ten properties in many parts of the UK are affordable to single house-buyers, according to the homeless charity Shelter. Meanwhile, three central London areas are completely unaffordable for couples with children or single people living on average wages: Kensington and Chelsea, Westminster and Camden
This garage was sold for £251,000(04 of10)
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It's JUST a garage.
And this tiny Chelsea lawn went for over 80 grand(05 of10)
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This tiny lawn in Chelsea sold this month for £84,000, and it doesn't have planning permission or right of way.
This garden looks a bargain by comparison(06 of10)
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It sold for £53,000 last September - and you can't do anything on it at all
You'll only need save for 30 years to buy a home...(07 of10)
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So says independent research commissioned by Shelter .That boy has already started on his first house...
You might as well move here(08 of10)
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It's cheaper to commute from Spain than to live in London.
Other Bank of England chiefs are worried...(09 of10)
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Sir Jon Cunliffe, the Bank's deputy governor for financial stability, has warned that it would be "dangerous to ignore the momentum that has built up in the UK housing market."He also said that the housing market was the "brightest light" blinking on the dashboard of financial hazards that the Bank monitors.
Broadbent himself admits he may be wrong(10 of10)
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While arguing that Britain is not showing signs of a housing bubble, Broadbent admitted that it may be easier to spot with hindsight. “Bubbles are things that are things that are far easier to identify after the event than at the time," Broadbent told Radio 4's Today programme. (credit:Reuters )
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