Jump to content
House Price Crash Forum
rantnrave

Guardian: Labour considers house price inflation target for Bank of England

Recommended Posts

Labour considers house price inflation target for Bank of England

https://www.theguardian.com/business/2019/apr/10/labour-considers-house-price-inflation-target-for-bank-of-england

 

The Bank of England could be set a target for house price inflation under plans being explored by the Labour party, with tougher powers to restrict mortgage lending to close the gap between property prices and average incomes.

The shadow housing secretary, John Healey, is considering whether, under a Labour government, the Bank should be set an explicit target following a decade of runaway growth in the property market, with the aim of tackling the housing crisis.

Under the proposals, the Bank could be mandated to guide house price growth within levels set by the government, in the same way that the central bank is handed a target to keep general inflation at around 2%.

Rather than using interest rates to achieve its aim, as is the case for general inflation, Labour is considering whether greater powers for the central bank’s financial policy committee, which is responsible for financial stability, could be used to curb house price growth by curtailing the availability of mortgages.

Threadneedle Street already imposes affordability criteria on mortgages, capping loan-to-income ratios at 4.5% of earnings for 15% of new mortgages to stop banks from lending to consumers who might struggle to repay. However, tougher limits could be applied if the Bank was at risk of breaching its target.

Healey is also considering an alternative plan, to set a formal government target for house price growth – which would not include using the Bank’s powers – as a way to guide decision-making across Whitehall.

Making changes to the Bank’s mandate would be a matter for the shadow chancellor, John McDonnell, rather than Healey. McDonnell has been mulling ways to shake up the role and power of the central bank, including a potential productivity target.

Labour could decide that curtailing house price inflation works better as a government policy target rather than a mandate for the Bank, but Healey is currently exploring both avenues.

The average price of a house in the UK has risen over the past decade by almost 50% to £228,147, from the post-financial crisis low of £154,452 in March 2009. Real wages have yet to rise above the level recorded before the crisis, pricing rising numbers of people out of the property market.

Labour calculates that house price growth of 2% each year since 2010, instead of the actual rate of about 4%, would have kept the average price of a home at seven times the average full-time wage rather than eight times as is currently the case. The house price to income ratio has skyrocketed: 20 years ago, it was four times that of pay 20.

Mounting uncertainty over Brexit has, however, dragged national house price growth down to 1.7% a year, the weakest level in six years. Britain is also forecast to see the first annual decline in prices in 2019 since the post-crash property slump of 2011, which raises questions about how a target for house price growth would work in the current environment.

Both Labour and the Conservatives are trying to find ways of tackling a lack of affordable homes across the country, which has pushed home ownership increasingly out of reach for millions.

The focus has, however, typically been on boosting the supply of new homes. While this is still central to Labour thinking, house price inflation targeting would be aimed at dealing with what it sees as an issue with the financial system fuelling excessive demand.

Labour’s exploration of the idea comes after the centre-left IPPR thinktank called for the Bank to be set a target of zero house price growth for about five years, then a rate of about 2% thereafter. However, the party has yet to decide on several key details that would be vital for making the plan work in practice, opening it up to criticism as it attempts to present itself as ready for government should an election be called.

Labour has yet to work through the exact level of house price growth that would be targeted, and whether to vary the policy depending on region.

House prices are falling in London but are racing ahead by about 4% a year in the north and Midlands. The average value of a property in the north-east is still below the level reached before the financial crisis.

There is also the risk that tougher restrictions on mortgages could block lower-income households from getting a foothold on the property ladder. However, the party is also looking at reforming the help-to-buy scheme, or could move to underwrite mortgages for particular groups.

Edited by rantnrave

Share this post


Link to post
Share on other sites

The only problem with all this is they are all things to all people, tell you what you would like to hear and hope it sticks......what is said and what is done are two different things.....there is a possitive policy for everyone.;)

Share this post


Link to post
Share on other sites

It's a bit late now.

Would it reinforce the notion that house prices should always rise? and be used incorrectly to loosen lending standards at times when house prices are stagnant or falling?

Share this post


Link to post
Share on other sites
18 minutes ago, winkie said:

The only problem with all this is they are all things to all people, tell you what you would like to hear and hope it sticks......what is said and what is done are two different things.....there is a possitive policy for everyone.;)

You are 100% correct - Makes a change from them saying everything is free I guess

They have not heard of the law of supply and demand - they want to stay in the EU which will pour people into the uk - they adore refugees and economic migrants - they want mass immigration with no pressure on house price/rents 

DUH

Share this post


Link to post
Share on other sites

It would just result in the BoE writting letters to the chancellor as HPI is above target, but then panicking and lowering interest rates/QE etc if HPI dropped below 0.

Share this post


Link to post
Share on other sites

Defintiely a step in the right direction.

If tweaked to suggest minimal growth going forward, ie, house prices to grow at 1% less than wage growth, it could spectacularly kill off speculation

Share this post


Link to post
Share on other sites
21 minutes ago, Clarky Cat said:

It would just result in the BoE writting letters to the chancellor as HPI is above target, but then panicking and lowering interest rates/QE etc if HPI dropped below 0.

Interest rates wouldn't be part of it, they would only be allowed to use controls on mortgage availability. I suspect this would very quickly mean the end of BTL mortgages. 

Share this post


Link to post
Share on other sites
3 minutes ago, the flying pig said:

it's a good idea, & i suppose better late than never?

We need a decent Crash and re-setting, before such an index becomes useful.

Share this post


Link to post
Share on other sites

It is better that they're listening to what people are complaining about and at least starting to think about solutions that don't involve massive taxpayer bungs going into housebuilder pockets. 

It's a start - and they're going at it the right way by looking at the structure of the system rather than trying to fiddle with end users. 

Edited by PeanutButter

Share this post


Link to post
Share on other sites

There's MMR, which is achieving the same, although itll lag.

What they need to do is quite simple - insist that regulated, deposit taking banks hold 100% of the capital against IO loans.

Thats all.

You'll see all the IO loans - OO + BTL - move to where they should be - specialist finance companies where the money is created by selling bonds rather than drawing down from the BoE.

 

Share this post


Link to post
Share on other sites
28 minutes ago, lombardo said:

Let's hope there is a big crash before anything like this is implemented.

The big danger is exactly this, massive “gains” become baked in and the current wrap around jacket becomes normal day wear.

Share this post


Link to post
Share on other sites

"Labour have calculated that..." I don't trust anything that Labour have calculated, Diane Abbott school of maths anyone? We all know that Labour are useless with all monetary matters. And besides, after this breakdown in democracy we are currently facing over brexit, who can really trust a single word let alone a policy of any party today anymore?

And another thing... the house price falls in the SE have absolutely nothing to do with brexit.

This "news" story is just an ad for labour. If they really wanted to help people they would end help to buy, not extend and tweak it further...

Edited by bear.getting.old

Share this post


Link to post
Share on other sites
8 hours ago, Freezer? Best place for it said:

The big danger is exactly this, massive “gains” become baked in and the current wrap around jacket becomes normal day wear.

why do you think they have thought this up 😉 i don`t trust any of them 

 

Share this post


Link to post
Share on other sites

I expect Carney will choose to 'see through' run away HPI.!

RICS suggested a cap at 5% a few years ago...that was ignored and too high anyway.

Share this post


Link to post
Share on other sites
17 hours ago, bear.getting.old said:

"Labour have calculated that..." I don't trust anything that Labour have calculated, Diane Abbott school of maths anyone? We all know that Labour are useless with all monetary matters. And besides, after this breakdown in democracy we are currently facing over brexit, who can really trust a single word let alone a policy of any party today anymore?

And another thing... the house price falls in the SE have absolutely nothing to do with brexit.

This "news" story is just an ad for labour. If they really wanted to help people they would end help to buy, not extend and tweak it further...

"We all know"....you mean the press says because they want to protect the wealthy and starve the poor? Dianne Abbott grew up in a rough part of London, but went to Cambridge and became the first black woman in parliament in her early 30's. She is far more intelligent than the majority of MPs. That she muddled up some numbers in a live interview does not show she is incapable of doing maths, tonnes of pols have done similar or worse, without being crucified for it. But that's a "free press" for you.

As they say, Conservative voters fall into two categories, millionaires and idiots: to know which one you are, look in your wallet. With UKIP voters, it's a similar pattern, except the only millionaire who votes UKIP is bankrolling the party.

 

Share this post


Link to post
Share on other sites

The labour policy will practically eliminate BTL mortgages, as it will quickly become politically impossible to place a limit on mortgage borrowing for potential-homeowners while allowing it for BTLers. This is what we all want isn't it?

Share this post


Link to post
Share on other sites

Labour appoints vocal new shadow housing minister

https://www.propertyindustryeye.com/labour-appoints-vocal-new-shadow-housing-minister/

April 11 2019

Labour has appointed a new shadow housing minister with a strong opposition to estate agents, although it may actually be lettings firms that he is not keen on.

Alex Cunningham, who has been MP for Stockton North since 2010, has joined Labour’s housing team.

He will work alongside fellow shadow housing minister Sarah Jones and housing team parliamentary private secretary James Frith.

John Healey remains in the more senior role, as shadow housing secretary.

Cunningham has a history of criticising the sector, albeit by conflating estate and lettings agency work.

Following the Queen’s Speech in May 2013 he criticised the Government for failing to bring “greater regulation to bear on estate agents who routinely rip off those in the private rented sector”.

He has also been vocal on fees and deposits.

In July 2017, during Prime Minister’s Questions, he said: “My young constituent paid a £300 house-reservation fee to Pattinson estate agents, but the agents will not refund it after their landlord client withdrew from the contract because my constituent refused to pay 12 months’ rent in advance.

“She faces having to pay another agent non-refundable fees of £650 to secure a different property. When will the Prime Minister act to put an end to these rip-off fees and stop these agents capitalising on young people and others?”

During votes on the Housing and Planning Bill in 2016, he voted to retain secure tenancies for life but against requiring those on high incomes living in social housing to pay market rents.

Cunningham also opposed funding Right to Buy style discounts for housing association tenants and voted against requiring local councils to sell expensive properties to use the revenue to fund new housing.

More recently, he submitted a question to the Ministry of Housing, Communities and Local Government asking what steps are being taken to enable more local authorities to establish selective licensing schemes.

It comes as Labour has proposed setting a house price inflation target for the Bank of England.

Healey suggested the Bank’s Financial Policy Committee could use its powers to limit price growth such as by restricting mortgage availability.

Share this post


Link to post
Share on other sites
49 minutes ago, rantnrave said:

Labour has appointed a new shadow housing minister with a strong opposition to estate agents......

At last, not another Michael Green that fannys around being a Cassandra.  When in Power we will see if he lives up to this introduction.

Share this post


Link to post
Share on other sites
On 10/04/2019 at 09:28, the flying pig said:

it's a good idea, & i suppose better late than never?

Its a not a good idea, its typical labour trying to achieve a beneficial outcome by brute force instead of addressing root causes. LVT would be a far superior way of achieving similar results.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.