In a keynote economics speech at Barnett Waddingham’s Annual Pensions Conference in London Lord Lamont praised the government’s attempts to improve the housing market with Help to Buy but warned that potential dangers must be monitored.
He said: “There is no housing bubble at present, but there will always be a danger of one developing and it is in no-one’s interest that houses should become more unaffordable.
“The housing situation certainly needs to be watched closely for any signs of a bubble emerging, to prevent any future misery for property buyers.”
“My concern is that Help to Buy may encourage people with 95% mortgages to gear up too much. Banks have to make the commercial judgement. In a few years when rates rise, after 2016, according to the Bank of England, it is important that new buyers are able to continue to service their mortgages."
Lord Lamont highlighted the ending of Quantitative Easing (QE) as the biggest problem facing the world economy: “We have had five years of QE. If it hasn’t created sufficient increases in demand by now, is it ever going to do so?
“Growth in the United States by historic standards is still anaemic. What QE has done is put up asset prices with all sorts of distorting effects: bonds, high yielding shares, commodities, emerging markets and arguably house prices in certain parts of the UK.
“While QE was undoubtedly necessary in the early part of the crisis, it cannot go on forever.”