The property industry has hit out at calls made by business secretary Vince Cable to restrict the number of mortgages being approved - a move he feels would prevent a property bubble from developing in the future.
Mr Cable’s comments - ahead of a major speech from the chancellor - were made against banks, after it was revealed some are lending five times a mortgage applicant’s income. In his opinion, this should be restricted to a more suitable level, suggesting 3.5 times as the limit.
He feels that the an individual’s desire to purchase their own home should be weighed against the stability of the economy.
The business secretary’s comments have left many in the real estate industry stunned, as recent market studies shake off rumours of an impending property bubble. For example, the latest index from the Nationwide Building Society, released last week, suggested current activity in the housing market is pointing to signs of moderation, rather than agitation.
In addition, the latest report from the Royal Institution of Chartered Surveyors (Rics), released today (June 12th), said the momentum seen recently in the market has started to slow. The organisation attributes this stagnation to a lack of supply, higher prices and more shrewd lending decisions from banks.
Commenting on his firm’s findings, Simon Rubinsohn, chief economist at Rics, said: "What we are really seeing is some of the very strong upward momentum starting to come off the housing market, as a lack of supply, higher prices, more prudent lending measures and some of the talk from the Bank of England are creating a level of caution among sellers and buyers.”
When pressed for further information, Mr Cable admitted that the boom in prices is currently confined to the south-east, rather than widespread across the country. However, he still maintained that banks are “throwing petrol on the fire” by approving mortgages that run to high multiples of applicants’ incomes.