Many will find it little short of astonishing that we have moved, in barely a year, from a state of near famine in the housing market and fears over further falls in prices, to growing apprehension that we are heading for another house price bubble.
How can this be, when prices are still lower than before the financial crisis, transactions are running at two thirds of pre-crisis levels, and household incomes continue to be squeezed?
Concerns have been stoked by figures from the Halifax showing a 5.4 per rise in prices over the past year, and that in London prices have been racing ahead by 10 per cent. So fearful is the Royal Institution of Chartered Surveyors (RICS) at the pace of house price rises that it calling on the Bank of England to impose a five per cent cap on annual house price growth. This is needed, it says, to “put a stop to any dangerous build-up in household debt”. It argues that a clear message from the Bank of England’s Financial Policy Committee that it will not tolerate house price rises above a certain limit would restrict any over-the-top price expectations of sellers and discourage buyers from taking on too much debt. It suggests that caps be placed on the terms of a mortgage, the amount people can borrow in relation to their deposit or the sum they can borrow in relation to their income.
After the long build-up in prices in the six years to 2008 and the sudden bursting of the house price bubble, the RICS is right to be vigilant. But a curb on price rises above five per cent is impractical. The London market is being driven by continuing high demand from overseas buyers who value the UK for its political stability and this will not be affected by mortgage curbs. Scotland and the rest of the UK have experienced no such rise in prices, and a policy that held back lending in Scotland to address a problem in London would be absurd. In addition, different segments of the market have different dynamics so a “one size fits all” would be inappropriate.
Scotland needs to see more house transactions and in the main urban centres, continuing help for first time buyers. It also needs to see a very substantial rise in private sector housing starts. It is essential that mortgage lenders maintain constant vigilance on lending criteria and in particular ability to repay so that the excesses of 2002-08 are not repeated.
Toughened mortgage lending rules are also due to come into force in April next year, to ensure home owners can only take out mortgages they can afford to pay back. Finally, the RICS and the market overall may well find that fears of over-heating will quickly dispel once the era of ultra-low interest rates comes to an end – and that looks likely to come sooner than Bank governor Mark Carney’s “forward guidance” currently suggests. Mortgage borrowers today would do well to bear this in mind: today’s rock-bottom lending rates are not going to last forever.
Wed tradition to tolerance
Attitudes to gay marriage continue to move in the direction of acceptance. That is the reality with which the Church of Scotland and its congregations have to deal. However, MSPs were told yesterday of concerns that the protection of the right of religious groups not to carry out same-sex ceremonies contained in the Marriage and Civil partnership (Scotland) Bill could lead to legal challenge in court and aggressive litigation that could see this protection swept aside. The Rev Alan Hamilton, convener of the Kirk’s legal questions committee, warned MSPs that the legislation could be an “invitation” to take religious bodies to court, forcing the church to consider whether it was worth continuing to offer marriages in Scotland.
Such an outcome would be highly controversial and deeply unsettling for many thousands who respect and revere religious blessing for marriage. The church issued a statement later giving assurance there are no plans for it to stop conducting marriages and the Rev Hamilton said marriage “is a binding force for good and will continue to be so for many years and generations to come”.
These assurances are welcome. But the episode provides an insight into the complexities for the church and its concerns that rights have to be balanced with respect for freedom of religious belief and practice. The general Assembly agreed in May to look at the case for the practice common on the continent of all marriages being civil but couples having the option of a church blessing later. In a matter of such deep sensitivity, it is surely right that it is given time and space to explore this issue and its implications thoroughly. Tolerance is a sword that cuts both ways.