The Institute for Public Policy Research (IPPR) is demanding the capping of mortgages at 90 per cent, Clear Property Investment has learned.

In a report issued this week, the government thinktank insists that caps on both ‘loan-to-value’ and ‘loan-to-income’ ratios would prevent another housing boom. Further demands include mortgages at three-and-a-half-times the gross household income.

They also want the Financial Services Authority (FSA) to agree to their capping recommendation when they publish their next Mortgage Market Review although many analysts report the FSA is not keen on the measure. An FSA consultation paper will be issued this summer.

The Institute hopes the measures would stabilise house prices.

Nick Pearce, IPPR director, meanwhile say the market is aimed at the wrong type of investor.

“The UK has the lowest level of institutional investment in private rented housing in Europe. We should be encouraging institutional investors to ‘build-to-let’ while discouraging individual property speculators using buy-to-let mortgages which can artificially inflate our housing market,” he said.

According to the results of a recent YouGov poll, commissioned by homelessness charity Shelter, first-time buyers also back capping in a bid to encourage more responsible mortgage lending. This is despite it making the acquisition of a property being more difficult for themselves.

As a result of the credit crunch Briton’s had higher mortgages, relative to their income, than any other major world economy.

Mr Pearce added: "Almost all of the increase in household indebtedness in the UK has been as a result of more mortgage borrowing. At the end of 2009, the UK household sector had debts totalling £1.53 trillion, of which £1.19 trillion (78%) was secured on dwellings."

As a percentage of GDP, the UK has the highest levels of mortgage lending at 81 per cent. In America the figure is 73 per cent, Canada 49 per cent and western Europe 44 per cent. 

The British population has undergone four housing bubbles within the past four decades, according to Mr Pearce. This, he added, has contributed to major economic and social problems.

Insisting on the prevention of “runaway house inflation,” he urged; “We must learn the lessons from this economic history.

“We need tougher mortgage market regulation from the FSA, especially caps on 'loan-to-value' and 'loan-to-income' ratios."

For further information on property values, mortgages and investments please don’t hesitate to contact our staff at Clear Property Investment.


 

 

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