Frankish cautions that many commentators appear to have misconstrued the Governor's remarks - made to delegates at a Scottish CBI dinner on Monday - as indicating that the Bank of England is expecting property prices to fall significantly in the short to medium term. 'In actual fact, Mr King said that there are "some early signs. of a slowdown in the housing market". He
did not say that there would be a price crash,' states Frankish.
'The Governor went on to stress that borrowers should look properly at what the market is likely to do. In other words, people should make sure that they can actually afford to service their mortgage debt, especially if rates rise further, as predicted, later in the year,' adds Frankish.
'The whole basis of what Mr King was saying is that the housing market needs to slow down in a controlled manner - something that the latest Royal Institution of Chartered Surveyors house sales figures are starting to indicate. What he did not say is that the bank of England is expecting house values to collapse, as some have interpreted,' he clarifies.
Frankish adds that, 'as mortgage brokers, we would be happy to see some stability return to the market. In fact, we actually welcome some heat being taken out of the market, as this will help stabilise prices and hopefully herald the return of the first time buyer.'
'We are in no doubt that there will be further slight rate rises during the remainder of the year,' Frankish continues. 'These may be necessary to help bring house price inflation down to a sensible level, from the current figure of around 19%. Ideally, we'd like to see rises of about 7% or 8% year on year, which would help to keep average prices in check,' he stresses.
'The Bank of England is clearly not scaremongering, it is merely advising prospective borrowers that a mortgage is a big commitment, and that they should consider affordability very carefully, as values and interest rates can fluctuate either way. It is important not to take Mr King's comments out of context,' concludes Frankish.
