House prices: Bank of England urges prudence, not panic
07-07-2016
Governor Mark Carney tells prospective buyers to be cautious and use 'common sense' when buying a home
"We are advising people to be prudent," governor Mark Carney said. "If you are taking out a mortgage, at some stage during the life of that mortgage, conditions will be difficult.
"You want to be able to ensure that you can service that mortgage even if times are tough, so think about where interest rates will go, where wages will go in the lifetime of that mortgage."
Carney was obviously in part reflecting a changed post-referendum climate. Economic tremors are expected to reduce transaction volumes in the short term and could slow, or even reverse, house price growth.
In its latest stability report, published yesterday, the BoE in particular highlighted buy-to-let landlords, who buy property as an investment and are more influenced by shifts in sentiment.
According to Mortgage Strategy, it says landlords have the potential to "behave procyclically, amplifying movements in the housing market". The BoE will keep monitoring behaviour in this group.
For most buyers, there is just that warning - which Adam Challis, that head of residential research at the property group JLL, told the Daily Telegraph amounts to "just common sense".
He adds: "What Mr Carney is rightly trying to say to your average aspirant homeowner is that they should think more fully about protecting themselves from the potential of the downside risks, such as loss of a job, stagnant wages or a decline in the property market.
"He’s not suggesting [a crash] is going to - or even likely - to take place."
Carney pointed out that the caution was as much to do with a longer-term surge in house prices to record levels as any post-Brexit effects. Of his call for prudence, he added: "We would tell you that if we were in the tenth year of a boom. It would be the same message."
This all chimes with the advice of most property market experts, including Virginia Wallis in The Guardian and property expert Ray Boulger in the London Evening Standard, who have both told readers worried about the Brexit effect that as long as they have a reasonable deposit and are looking to live in the home long-term, they should go ahead with any agreed purchase.