Business Secretary Vince Cable, speaking at a Lib Dem event in 2011 Photo: Lib Dems
Cable joined the voices of those concerned about a potential bubble in the UK today, telling the BBC that he was “appalled” lenders had been issuing mortgages worth five times the income of applicants.
Figures from the Council of Mortgage Lenders (CML) today showed that mortgages for first-time buyers have soared in the last 12 months. The average first-time buyer borrowed 3.42 times their income in April 2014, a stark rise from decades ago, but within the 3.5 times recommended by Cable. Nonetheless, there are some banks lending money at far higher sums, which has prompted the Business Secretary to stop the housing boom getting “out of control”.
“In the short-run, the immediate problem is to stop this boom getting out of control,” he told the BBC .
His comments come despite new figures from the RICS (below), which suggest the UK housing market’s growth is entering a period of moderation as caution spreads among buyers.
Paul Smith, CEO of haart estate agent, hit back at Cable’s comments: “It’s not clear why Vince Cable wants to kill off first-time-buyers vastly reducing their ability to get a mortgage and strangling the current housing market recovery. Indeed his proposals will also hold current homeowners hostage in their own homes, as they will not meet the lending criteria when they chose to move on and need a bigger mortgage. Those coming to the end of interest-only loans will also come unstuck and be dealt a double whammy with the fallout from the Mortgage Market Review still trickling through. Cable’s flawed plan would also knock housebuilders for six. Where is the encouragement to build homes if people, ready and very able to buy, won’t be lent the money?”
“The whole point of a mortgage is to help those who aren’t lucky enough to make a cash purchase and that’s the majority of the UK’s aspiring homeowners which ever rung they are on.”