Gone are the days when the Bank of England was just known for setting interest rates in order to control house prices and inflation.  Now this is not tenable given the number of home-owning families already battling against an ever increasing cost of living, the Mark Carney, the Governor of the Bank of England is looking elsewhere to control house prices rather than simply tweaking interest rates.

It seems that he has several options open to him.  According to the Guardian, in an article by Larry Elliot posted on 14^th April 2014, Carney is considering bringing in an affordability test that that will oblige lenders to test whether borrowers could cope with significant increases in mortgage rates.  Capping loan to value ratios would also help keep prices in check.  This would fly in the face of George Osbourne’s Help to Buy Scheme which is helping buyers with their deposit.  Though ‘Help to Buy’ has not gathered significant enough pace to be impacting on the price rises yet, counteracting it would slow increases if a 75% cap of loan to value, country-wide was implemented.  It would have to be graduated, favouring first-time buyers.

If I were to put money on it, it would be on him not intervening before the next election.  First time buyers are getting entry to the market – whether with the help of ‘Help to Buy’, ‘Bank of Mum and Dad’ and the probable restoration of interest only mortgages.  Carney is likely to keep blowing the property bubble especially as it keeps the feel good factor going and  Cameron and Osbourne need it to keep the votes coming in.

Richard Butler-Creagh