There are some warning signs of actions to curb borrowing. During May, Lloyds announced that it would not grant a loan of above £500,000 where the amount borrowed exceeded the borrower’s income by 4 times.
This is only likely to have an impact in London where property values have soared (up 17% over the last year according to the Office for National Statistics).
House prices across the UK have risen by 8%.
The Governor of the Bank of England, Mark Carney, warned that Britain’s housing market has “deep deep” problems and that rising prices are the biggest threat to the economy.
He has given broad hints that the Bank of England’s Financial Policy Committee is prepared to act to deal with these matters and suggested a couple of options.
The Bank must be very careful not to risk killing off the recovery and its future moves are awaited with interest.
Meanwhile, the Financial Conduct Authority carried out its Mortgage Market Review.
One of its objectives is to “stress test” potential borrowers, particularly in how they would cope if and when interest rates rise.
Lenders and Mortgage Advisers like Cambrian are required to obtain much more information than previously, particularly about borrowers’ actual and potential future spending.
This has had the effect of slowing down the mortgage process and it was recently reported that an average of 90 days would elapse between an offer on a property being accepted and the lender issuing the mortgage offer.
With the MMR now being in the equation, there is a genuine possibility that mortgages that might have been granted in 2013 will not be granted in 2014.