Treasury to find ways of calming housing market
12 March 2004
The Treasury plans to publish two studies on ways of dealing with the rapid increase in house prices ahead of Wednesday's Budget.
Chancellor Gordon Brown claimed that wild swings in the price of homes in the UK were to blame for many of Britain's economic problems over the last 50 years.
Bank of England Monetary Policy Committee member Kate Barker and Imperial College professor David Miles both released interim findings in December.
In his report into why the uptake of longer-term fixed rate mortgages is so low in Britain, published today, Professor Miles called for an end to the practice of lenders using their existing borrowers on standard variable rates to subsidise competitive deals aimed at new customers. He also concluded that better information on mortgage rates for consumers was needed.
Ms Barker was asked to consider why new housing supply has failed to keep up with demand. She concluded in December that tough planning rules and the construction industry's limited appetite were partly to blame. She added that Britons were being increasingly priced out of the market and urged local authorities to provide more affordable housing. Ms Barker's full report will be published next week.
Fears that a property price crash is just around the corner have been growing in recent months as the UK housing market shows no signs of slowing down.
The Bank of England's monetary policy committee has raised the cost of borrowing over the past few months in a bid to cool down house prices, but must be careful to avoid leaving debt-ridden Brits struggling to pay off loans.