Andrew Frankish, operations director at Mortgage Talk, has welcomed comments by Bank of England governor Mervyn King earlier this week, saying they bring some much needed realism into the property market.
Frankish cautions that many commentators appear to have misconstrued the governor's remarks – made to delegates at a Scottish CBI dinner on Monday – as indicating that the Bank of England is expecting property prices to fall significantly in the short to medium-term.
Frankish says: “In actual fact, King said that there are some early signs of a slowdown in the housing market. He did not say that there would be a price crash.
“The governor went on to stress that borrowers should look properly at what the market is likely to do. In other words, people should make sure that they can actually afford to service their mortgage debt, especially if rates rise further, as predicted, later in the year.”
Frankish adds: “The whole basis of what King was saying is that the housing market needs to slow down in a controlled manner – something that the latest Royal Institution of Chartered Surveyors house sales figures are starting to indicate. What he did not say is that the Bank of England is expecting house values to collapse, as some have interpreted.
“As mortgage brokers, we would be happy to see some stability return to the market. In fact, we actually welcome some heat being taken out of the market, as this will help stabilise prices and hopefully herald the return of the first-time buyer.
“We are in no doubt that there will be further slight rate rises during the remainder of the year. These may be necessary to help bring house price inflation down to a sensible level, from the current figure of around 19%. Ideally, we'd like to see rises of about 7% or 8% year on year, which would help to keep average prices in check.”