Banks have been warned to watch their lending practices and avoid approving potentially risky mortgages.  In the last year house prices in the UK have risen close to 10% and data has shown that those purchasing are borrowing at a higher share of their household income than any other time since 2005.  This could signal that some borrowers may be stretching their budget and taking on mortgage loans they cannot afford.

Some economic experts have issued fears that the housing market is growing too rapidly for the current state of the economy.  Demand has outpaced supply and asking prices are moving out of reach of many shoppers.  This could be signaling the existence of a housing bubble for some critics of the low deposit aiding scheme from the government of Help to Buy.  There are those that warn that the Bank needs to begin raising the standard base interest rate sooner rather than later while others are calling an end to the Help to Buy scheme.

The Bank of England’s Financial Policy Committee (FPC) has issued a statement that they will be watching the market closely. 

The Bank’s statement said, “Given the increasing momentum, the FPC will remain vigilant to emerging vulnerabilities, will continue to monitor conditions closely and will take further proportionate and graduated actions if warranted.”

Banks may be forced to hold more capital assets against mortgage loans to insure their stability in mortgage lending.  This could tighten up mortgage and remortgage lending.

There is concern that in the event that lenders increase their interest rate that many homeowners will find it difficult to handle their repayments.  This is especially so for those that have settled comfortably into their lender’s standard variable rate (SVR) rather than seeking to remortgage.