London - An expected pickup in property-price growth and an expanding buy-to-let mortgage market aren’t undermining UK financial stability, the Bank of England said.
House-price inflation is set to accelerate as sales volumes increase and mortgage-rate spreads fall to the lowest in seven years, the BOE’s Financial Policy Committee said in a quarterly statement on Friday. And growth in buy-to-let mortgages, whose outstanding value has risen 40 percent since 2008, doesn’t require immediate action.
The report indicates officials are counting on existing government and central bank measures to prevent excessive leverage. Borrowing by landlords has helped drive house prices 4.6 percent higher in the year through July, in contrast to wage gains of just 2.9 percent.
“While house prices are recovering quite strongly, it’s not really enough to see households overleveraging themselves and creating a financial-stability risk,” said Chris Hare, an economist at Investec Securities in London and a former central bank official. “The bank, if it wanted to, could clamp down on demand but it’s decided it doesn’t want to do that at the moment.”
The FPC’s approval of the current state of the housing market also includes the government’s Help to Buy program, which helps enable purchases with a down payment of as little as 5 percent. The BOE’s second annual review of the plan found that it presented no financial stability risks at present.