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Treasury Watchdog Sounds Alarm Over Runaway Property Market

Treasury Watchdog Sounds Alarm Over Runaway Property Market

Treasury Watchdog Sounds Alarm Over Runaway Property Market

  • Office for Budget Responsibility (OBR) says speculators are inflating property prices
  • Average price of a London home is expected to jump from £458,000 (GBP) to £650,000 (GBP) by the year 2020
  • Average price of a UK residential property reached £254,000 (GBP) in January

Following on from last Friday’s post about the Government’s independent watchdog the Office for Budget Responsibility (OBR), the Treasury’s chief watchdog, Robert Chote has spoken out.

Soaring UK property prices are being inflated by speculators banking on further gains, causing Robert Chote, head of the Office for Budget Responsibility (OBR), to issue a warning that the UK is on the verge of a dangerous housing bubble.

Mr Chote told Treasury Select Committee MP’s: “With very rapid house price increases in some parts of the country you might see bubbly activity where people are willing to buy stuff off plan or not intend to live in it. The surge in prices is partly down to soaring demand, driven by rising confidence, increased lending, and government schemes such as Help-To-Buy combined with a general lack of supply. You can explain the increase in house prices by fundamentals without having to resort to saying there is a bubble going on. That doesn’t mean to say there may not be some bubbly components to what is going on in the housing market in particular parts of the country.

Treasury Watchdog Sounds Alarm Over Runaway Property Market as average price of a typical residential property climbed to £254,000 (GBP) in January 2014 – an increase of 6.8% in a year

Treasury Watchdog Sounds Alarm Over Runaway Property Market as average price of a typical residential property climbed to £254,000 (GBP) in January 2014 – an increase of 6.8% in a year

Official figures show the average price of a typical residential property climbed to £254,000 (GBP) in January 2014 – an increase of 6.8% in a year.

Residential property prices were up:

  • 13.2% in London
  • 7.1% in the South East
  • 6.9% in Wales.

As already reported on Spotlight, the OBR expects house prices to rise by more than 30% in the next five years, meaning that the average price of a typical residential property in London is expected to jump from £458,000 (GBP) to £650,000 (GBP) over the next six years.

Mr Chote insisted that the OBR was not “taking a view that house prices are over or undervalued, house price inflation should cool from 8.5% this year to 3.7% in 2017 and 2018.

Steve Nickell, an economist who sits on the OBR with Mr Chote, said: “A bubble arises when demand is being driven by people wanting to get in because of expectations of price growth rather than for somewhere to live. The house price to income ratio has been growing for the last 40 years but that cannot go on forever because everything you consume would become housing and there would be nothing else left.’

But David Ruffley, a Tory MP on the Treasury committee, said forecasters always expect a ‘benign return to equilibrium’ and fail to predict the cycle of boom and bust.

Property Investors Celebrate Removal Of Income Requirement From Buy-To-Let Mortgages

Property Investors Celebrate Removal Of Income Requirement From Buy-To-Let Mortgages

Buy-To-Let Mortgages On Offer
Based On Rental Income

There is good news for UK based property investors looking for a buy-to-let mortgage as lenders are beginning to understand how landlords make profit from property. Now one lender is taking the lead and offering buy-to-let mortgages based on rental income without worrying about a borrowers personal income.

Mortgage lender, BM Solutions, part of the Lloyds banking group, has removed their minimum £25,000 (GBP) income requirement from all of their buy-to-let mortgages.

Instead, the lender will make a buy-to-let mortgage offer based on the potential rental income expected to be generated by the rental property purchase, rather than being based on a borrower’s employed earnings.

The BM Solutions Buy-To-Let mortgage affordability calculation remains at 125% of the rental income, but the overall lending criteria have been tightened.

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Millions Regret Not Buying Property In 2012

Millions Regret Not Buying Property In 2012

A significant number of UK adults regret not buying property last year, new research by First Direct has shown.

Around 1.5 million people have responded to a banking and mortgage survey stating that they regret the fact they did not buy property in 2012.

The study revealed 3.6% of adults in the UK feel this way, which represents more than 1.5 million individuals.

Among the 25 to 34-year-olds, this proportion rose to 8%- the equivalent of almost 600,000 people.

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Take That To The Bank

Guest post by Bobby Gill

Ever been frustrated or felt ripped off by your bank?

Yep thought so.

Maybe this letter will make you feel better and give you some ideas next time you contact them… shortly before closing your account and banking with a Co-Operative Bank instead!

Read more of Bobby’s thoughts and musing here – http://bobby-gill.blogspot.co.uk

Dear Sir:

I am writing to thank you for bouncing my cheque with which I endeavoured to pay my plumber last month.

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