House price surge is the biggest threat to UK financial stability according to the deputy Governor of the bank of England.
Sir Jon Cunliffe has warned that it would be “dangerous to ignore the momentum that has built up in the housing market”.
This follows data from the Nationwide Building Society that prices had grown by 10.9% in the last year which is the highest growth rate for seven years.
The increase for April was 1.2% even though this has been slowing in the last few months. The price rises are no longer limited to London and extending to other parts of the UK.
Without family help to upsize, the only option is for remortgage buyers to stay in their existing home and continue saving more for a bigger deposit.
Rising house prices allows the equity release mortgage buyer to access money to consolidate debt, for home improvements or even help your children start or expand a business.
Action may need to be taken
If house prices continue to rise, the Bank of England’s Financial Policy Committee (FPC) may recommend action to be taken in the next few months. It is possible that the Help to Buy scheme could also be pushing prices higher.
He said that although mortgage approvals have fallen, if the rate of growth continues the approvals would reach the pre-crisis levels of 12,000 by the end of the year.
Sir Jon has said that the Mortgage Market review (MMR) with tighter underwriting standards could reduce the momentum and constrain house prices but “they have not yet been tested”.
The Bank has already taken some measures to prevent a bubble by withdrawing the government’s Funding for Lending Scheme (FLS) in January.
Other options would be to force banks to hold more capital as security against mortgage loans or limit the amount people can borrow by enforcing a proportional cap.
Another method would be to impose limits on the loan-to-value ratio people can have to get a mortgage and this would impact both first time buyers, remortgage buyers and home movers.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
Learn more by using the equity release calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even buy a more expensive home.
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