The Bank of England needs to tread carefully and its decision to extend quantitive easing yesterday has been greeted with some surprise by the property industry.
PropertyWire.com – 8 May 2009
While most believe that keeping interest rates unchanged at 0.5% is the right thing to do there is some unease about the Bank’s decision to extend its quantitative easing programme by £50 billion to £125 billion.
‘The Bank of England’s decision to extend its programme of quantitative easing suggests that it is still fairly pessimistic about the economic outlook and, in particular, the outlook for bank lending,’ said Royal Institution of Chartered Surveyors senior economist Brigid O’Leary.
She said, and others, have said that it is an increase in lending that is now needed urgently to help the UK property market on the road to recovery.
‘The move also suggests that the Bank expects interest rates to stay low for the foreseeable future. So far, there has not been much evidence that quantitative easing has boosted bank lending significantly,’ she added.
‘RICS hope that increasing the size of the asset purchasing scheme will stimulate bank lending and help improve availability of mortgage finance. That is one vital way to allow the recent increase in buyer enquiries to translate into an increase in sales and may help to lift the housing market out of its depressed state.’
Brigid O’Leary and others, have said that “it is an increase in lending that is now needed urgently to help the UK property market on the road to recovery.”
Lending to whom one might ask. People that haven’t saved a deposit ?
That would simply mean a return to unaffordable high house prices. Is that what is really needed ?
There is lending available. The only difference is that people now need a significant deposit to buy. That’s the way it should be. Houses affordable to those that can truly afford to have a mortgage.
So maybe the ways things are now & are set to be in future, isn’t so bad. The market will be less volatile with less chance of boom & bust. Another so called ‘recovery’ with easy mortgages would simply be the path to the next boom then bust.
Comment by Dave Jobson — 10/5/2009 #