Mortgage lenders waded into the debate over the state of Britain's housing market yesterday, as the Council of Mortgage Lenders (CML) claimed that talk of a new boom was "premature".
The intervention came as the Business Secretary, Vince Cable, warned at a CBI conference in Warwick that the "housing market getting out of control" was a key risk to "the beginnings of a recovery story" for the UK. Barclays' chief executive Antony Jenkins also warned of "property-driven boom".
Figures from the Royal Institution of Chartered Surveyors showed house prices recording their fastest rise in almost seven years during August. New buyers are flooding into the market at their quickest rate since its survey began, and surveyors are braced for the strongest price rises for more than a decade, encouraged by recovering consumer confidence, the Government's Help to Buy scheme and the Bank of England 's Funding for Lending scheme.
But the CML's research sought to pour cold water on worries of an overheating housing market. It said the pattern of the current housing recovery was similar to the one following the crash of the early 1990s, while the Bank of England was ready to deploy a range of tools to ensure that prices stay under control.
The organisation said: "Commentary suggesting this improvement is an incipient boom is premature. Data indicating improving conditions in the housing market have begun to emerge this summer, but we are in the early stages. Comparisons of longer-term trends show that the current recovery is so far following a pattern broadly similar to the extended period of improvement that we saw in the last cycle."
The CML's figures show mortgage lending in June and July was 27 per cent higher than a year earlier, but it added that it did "not imagine that Bank officials are losing sleep about current developments in the housing market". The Bank of England's Governor, Mark Carney, said in a recent speech that the Bank is closely monitoring conditions and could intervene through measures such as raising the amount of capital banks are required to hold against mortgages, making them more expensive.
But Mr Jenkins, speaking in New York, voiced his own concerns over the state of the market. He said: "We are seeing probably a more buoyant housing market for the first time in perhaps as much as a decade... There is the risk of a property-driven boom in the UK. The regulators are on it and don't intend to let it happen but these things can be difficult to control." He added that "the sorts of things you'd expect to fuel economic growth in the UK still seem to me to be quite weak".
Recovery pace surprises Clare
The chief executive of one of Britain's biggest housebuilders yesterday admitted he was "surprised" at the pace of the housing-market recovery as sales and profits soared.
Barratt Developments boss Mark Clare said the impact of improved confidence and government props including the Help to Buy initiative had helped drive a 29 per cent rise in sales in the last 10 weeks alone.
Mr Clare, who also unveiled a 74 per cent rise in Barratt's pre-tax profits to £192.3m in the year to June, said the buoyant market conditions were spreading beyond London and the South-east thanks to other initiatives such as the Bank of England's Funding for Lending scheme, which has boosted mortgage lending.
Video: Mark Carney questioned by MPs