Mark Carney – “Deep Deep Structural Problems” UK Property Market

The British housing market has “deep, deep structural problems” according to the Governor of the Bank of England who is hinting that he believes house builders and mortgage lenders are at the root of the difficulties.

Speaking on Sky News, in an interview extensively leaked to the rest of the Murdoch news empire, Mark Carney says there was evidence that large mortgages of more than four times borrowers’ salaries, were being made available more freely.

“We don’t want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term. We’d be concerned if there was a rapid increase in high loan-to-value mortgages across the banks. We’ve seen that creeping up and it’s something we’re watching closely” he says.

But he says the biggest single problem is the shortage of new homes – Carney claims twice as many houses are built each year in his native Canada than in Britain which has double the Canadian population.

Construction started on 123,000 homes in England last year according to new government figures, yet house-building remains short of the 200,000 which many analysts believe to be the optimum needed each year to reduce the overall shortfall. “We’re not going to build a single house at the Bank of England and we can’t influence that” Carney says.

Estate agents have yet to react to Carney’s speech but Home Builders’ Federation chief executive chairman Stuart Baseley has stoutly defended his members’ contribution to addressing any possible housing bubble. “First quarter private starts up a remarkable 44 per cent year on year, with ‘year to March’ private starts up 34 per cent. To maintain and sustain these increases house builders need stability” he says.

His comments about stability may be about the future of the Help to Buy scheme: Murdoch newspapers have speculated on how the maximum cost of a home which can be purchased using the scheme may drop from the current £600,000 to as low a figure as £300,000.