Rumoured plans by Labour to grant the Bank of England powers to cap house price inflation, should they win the next election, have received a dismissive response from intermediaries.
A report in The Guardian suggested that John Healey (pictured), the shadow housing minister, wants the Bank of England to be given an explicit target for house price growth, in much the same way that it has an inflation target.
In order to keep growth under control, the plans would see the bank given additional powers, such as restricting the availability of mortgages.
State intervention would be ‘worrying’
Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said that any sort of government intervention on house price inflation – particularly the idea of a target – was worrying.
He noted that there are a host of different factors that contribute to house prices, adding: “A property value is dictated by the price the open market deems a buyer will pay typically and that has always worked.”
Cunnington noted that ultimately borrowers are the winners from the increase in product innovation from lenders, suggesting that he would prefer to see a greater focus on “ensuring strong client outcomes rather than over regulation and state intervention in a market that is actually working pretty well.”
A new tranche of mortgage prisoners
Stuart Gregory, managing director of Lentune Mortgage Consultancy, noted that government intervention in the housing market rarely goes well, and argued that this type of proposal does not deal with the major issues in the sector.
He added that for decades the housing market “has driven the economy” and that “playing with that now won’t help the wider economy to bring fruitful rewards for all.”
“What will Labour say to those who already have mortgages who, if lending rules were tightened even more, would be a new tranche of mortgage prisoners?” he continued.
A move in the wrong direction
James Mole, independent financial adviser at Gingko Independent, said this idea might have merit if it was easy to get a mortgage at the moment, but that is not the case, and argued that this would be “a move in exactly the wrong direction”.
He continued: “I think lending rules are already too tight. I don’t mind if banks are told to strengthen their balance sheets, etc, but I do mind when you are telling people who can easily afford a mortgage that they have to rent for another 10 years because of stupidly over cautious rules.”