Chancellor’s lending reforms could spark house price crash

Every time any government looks at cutting red tape and easing regulations on lending someone pops up and warns of a housing bubble.

This is ridiculous and indeed ignorant because it takes no acccount of the fact that after these very modest proposals the UK mortgage market will remain far more highly regulated than it was in 2008.

Just to give two examples, we have the FCA affordability regime which requires lenders to ensure that all mortgage lending is affordable at the point at which it is taken out, which takes account of expenditure as well as income. On top of this, lenders as a whole are not allowed to advance more than 15% of their mortgages at a loan-to-income ratio of 4.5 times or more, even where these are deemed affordable under the FCA regime.

The 2008 crisis resulted from a crisis in the global financial system brought about by the bursting of a US housing bubble. UK mortgage arrears peaked at less than 2% of all loans despite rising unemployment, showing that the vast majority of UK lending and borrowing was responsible even back then.

Totally agree that there are inherent risks with this policy, particularly in regards to a weak economic growth and The weak jobs market.
Huge losses of rental stock due to policy changes from the government as well as slow building speed due to a lack of skilled workers.
The right policy for growth is to release money top and bottom to allow spending (tax income) and investment (economic growth)
Investing in infrastructure when you’ve shut down growth doesn’t help house building, job availability (outside the short term infrastructure projects) or cash flow.

The property market needs to breath just like the economy and I’m sorry, this government is choking it off….

Reply to the comment left by Rob Thomas at 05/08/2025 – 10:19
If I remember correctly, these so called Leeds reforms include scrapping the cap of 15% of loans at 4.5 LTV!

“He stressed the need for more support for the PRS”.

Perhaps he is practicing this line for the Edinburgh Fringe; we really don’t need support of the type offered by both governments for the last 15 years.

We don’t want more support we want fair taxation and less interference.

Reply to the comment left by Keith Wellburn at 06/08/2025 – 09:15
Well actually no, they didn’t scap the cap. Previously, each individual lender had to stick to the 15% limit. Now individual lenders can exceed it but lenders as a whole must stick to it. A review is also taking place into the limit as a whole.

House prices have remained on an overall upward trend since 1900 and will do so for at least the next 100 years barring atomic war or the mini ice age coming back ( we are in the Grand Solar Minimum till 2055.(Source: Professor Irena Zharkova ,Northumbria University).
We have a population of 85 million people with the ability to support a population of 35 million people as established by Harold MacMillan in his secret 1953 survey prior to the ” Assisted Migration Programme ” under which the Australian government was given £2,695 gbp for every unwanted Briton they took in.
Under ” Predict and Provide” in 1990 when John Prescott deceased was in government there was a housing shortage of 4.4 million.
In the 35 years since then the population has risen by 500,000 a year over the build rate for new houses.
This excludes rubber boat people and those who have come on ” holiday” bought a spare NI number from a criminal or nefarious religious establishment which might have also sold bogus documentation to enable relatives and families in 3rd world countries to live here.
We are therefore 17 million houses short so with a new build rate of 300,000 houses a year plus it would take perhaps 3.5 years to build 1 million houses or 60 years and 12 Parliaments just to stand still.
Perhaps 3D printing and construction robots could close the gap but with a construction industry with 250,000 labour shortages and many trading insolvently the housing shortage will remain and get worse.
Yes there can be temporary falls in house prices but overall the trend is inexorably up unless stern measures are employed to deport people who should not be here ,elsewhere.

Cynically that may be the intention.

Will make it also cheaper for the government to compulsory purchase empty properties for their proposal to house asylum seekers.

I did post on here when the Renters Reform Bill rose it’s head that we will see tent cities in the UK. These won’t be for asylum seekers but for those already on Councils waiting lists and our current homeless