According to reports banks are putting ‘the brakes’ on approval of new mortgages as new rules come into play at the end of the month.
I am not sure why this is necessary, since from my experience in the industry, mortgagees and lending institutions are, if anything, taking an inordinate amount of time to approve mortgages burdened by the weight of regulatory processes and, if anything, they are frustrating the number of sales done by the time delays.
There is so much regulation now that a further burden on the lenders or borrowers is totally unnecessary.
There is no question that interest rates are going to go up slowly from their current historic low point but one would hope that lenders would absorb some of this cost so as to assuage a stampede amongst borrowers.
It is perfectly true that the market up to £2million is very active with a good amount of liquidity and growth of 5-6% that is a healthy and sustainable environment.
The market above £5million, and certainly over £10million, is doing very badly and does not need any further attenuation. In fact, the disconnect between these two markets should not continue indefinitely since there is a ‘percolate up and trickle down’ effect that takes place in the end.
The clumsy hand of government has to be very careful when it interferes in the dynamics of markets since it often can offer a remedy which is too little too late and the cure can be worse than the disease.
By way of illustration the SDLT(Stamp Duty Land Tax) changes in the Budget of 2012 (and since) together with the spectre of the looming Mansion Tax is having a very depressing effect on certain sectors of the market and this is a direct result of government policy.
The government cannot have it both ways. They are basking in the sunshine of a consumer led recovery that in part is driven by a feel good factor amongst consumers that is linked to a buoyant property market.
If you put a damp squib on to the latter, before you know it, consumers will stop spending and the fledgling recovery will be snuffed out
I think there are enough safeguards in the system to protect the consumer and the financial system at large without the need for further government intervention.