UK mortgage approvals highest since February 2008
Without more effort to drive house building I fear this help to buy thing is just going to cause a new housing bubble. House prices are already too high in much of rural England. More worryingly still if the economy falters we will find ourselves guaranteeing a whole load of mortgages of people who cant pay them. When allied to the fact that we have guaranteed billions of pounds worth of bank credit through Quantitative Easing I really start to worry about whether even an economy of 60 million folks is too big to fail? The last recession grew out of a housing credit collapse.
The QE thing is certainly a structural incentive to encourage more inflation than is good for a depressed economy – that’s something for another time, but if you really want to scare yourself on where QE might be leading get hold of a book called “Currency Wars” – back to the central point here – this story, hinting at unintended consequences – just on the housing front, tells us:
Mortgages approved by British lenders jumped to their highest level for more than five years in September, fanning fears the housing market was already heating up even before the latest government support kicked in.
Banks, building societies and other lenders approved 66,735 mortgages in September, the biggest monthly total since February 2008, before the global financial crisis took hold.
The figures, from the Bank of England, were just ahead of City forecasts of 66,000 and compared with an upwardly revised 63,396 in August. Mortgage approvals are seen by economists as a good early indicator of where the housing market is headed.
They follow government data on Monday showing house prices rose in every English region in September and are likely to be seized on by those who argue that the government’s Help to Buy scheme risks creating a new bubble.
“All the stimulus thrown at the housing market risks starting another dangerous boom-bust cycle,” said Rob Wood, chief UK economist at Berenberg Bank.
“The key issue is not where prices are today, rather it is where they will be in a couple of years. Prices and activity are rising fast now. We expect house prices to rise 10% year on year next year … The measures that selectively boost the housing market, like the Help to Buy scheme, should be scrapped.”