UK banks see housing prices as fastest growing risk: survey

19 Nov 2013


A survey has revealed that banks in the UK viewed a correction in British housing prices as the fastest-growing risk. The survey was published by the Bank of England yesterday.

The central bank's latest twice-yearly survey of economic threats seen by banks, building societies, insurers and asset managers said the impact of low interest rates on house prices had increased sharply as an area of concern since the May survey.

"Perceived risk around property prices ... rose, being mentioned by 36 per cent of respondents, up 11 percentage points since the previous survey," the Bank of England said.

"Concerns were concentrated almost exclusively on the residential market, where responses focused on the risk of a house price correction."

The survey is factored by the BoE into its financial stability work. According to the BoE, it saw no general housing price bubble in the making.

According to property web site Rightmove, fears that the UK's housing stimulus schemes were inflating a property bubble looked overblown.

The survey comes as the British Bankers' Association (BBA) warned Chancellor George Osborne to explain how and when the Help to Buy scheme would end.

According to the BBA, which represents the UK's largest lenders, Osborne needed to clarify the scheme's exit strategies.

Osborne devised the Help to Buy scheme to help kick-start the housing market, which had been suffering from low impetus since the recession.

The scheme, which had so far come in two parts, involved the Treasury guaranteeing part of the value of the mortgage, to give a leg-up to first-time buyers and those who were unable to fund a significant deposit.

Phase one, which got underway in April, offered top-up loans to buyers of new-build homes, while the second, announced last month, involved the Treasury underwriting part of the loans to buyers for all sorts of homes.

The association striking a cautionary note wrote to the Treasury: ''Measures to support housing supply remain crucial to ensure that higher activity in the housing market does not just translate into higher prices.

''Some members of the BBA are participating in the government's Help to Buy scheme, but further clarification is needed on exit strategies,'' the submission read.

The BoE survey also uncovered two other concerns among banks and other financial sector players. Government debt levels in Europe and the US as also the threat of an economic downturn were cited by respondents as points of risk.

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