Vince Cable has declared that action will be taken to stop the “housing boom” in certain parts of the UK from getting “out of control.”
The Business Secretary added that he was “appalled” that the banks had been allowing applicants to borrow five times their income, stating a “stable level” was closer to 3.5 times.
Mr Cable told the BBC,
“In the short-run, the immediate problem is to stop this boom getting out of control.”
Mr Cable added that banks “must not throw petrol on the fire” by issuing loans that gave out such high multiples of applicants incomes.
Speaking at the Mansion House, Chancellor George Osborne confirmed plans to give the Bank of England new powers to prevent the housing market from overheating.
Mr Cable’s views echo warnings from the IMF which have previously suggested that runaway house prices are slowing overall economic growth in the UK.
Housing statistics have shown that house prices are rising all over the UK and the latest figures from the Office for National Statistics found prices rising at 17% annually in the city, compared with 8% in the UK as a whole.
Change is on the horizon as last week the Nationwide Building Society said that there had been signs that the UK housing market was beginning to “moderate.”
Furthermore, the Royal Institution of Chartered Surveyors said that the housing market was beginning to lose pace, as “a lack of supply, higher prices, and more prudent lending measures” were making buyers more cautious.
This is the strongest warning by politicians yet that house prices will fall over the next year.
Negative equity issues will result in thousands being made mortgage prisoners, as very recent hindsight has already demonstrated.
As countless homeowners are still suffering the dire effects of the recession, millions more will potentially face the same prognosis.
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