The mortgage industry has hit back at Bank of England governor Mervyn King's warning that house prices could fall, arguing that it could spark a crash when there was little danger of one before.
Lenders and brokers say King does not need to “scare the living daylights out of people” by firing a warning to buyers and sellers, arguing that the recent slowdown has mitigated the threat of a fall in prices.
Housing expert John Wriglesworth fears King's comments could even spread eno- ugh panic to cause a crash, given the hysterical press coverage he believes King would have known would ensue.
Wriglesworth says: “King is too worried. The market will slow down and peter out. His comments are dangerous and could cause a crash. He did not have to scare the living daylights out of people.”
Lenders have also dismissed King's assertion, made in a speech at a CBI dinner in Glasgow this week, with Nationwide saying the likelihood of a crash is “very small indeed”. It argues that although affordability is becoming more of an issue, there is much more likely to be a period of stability or lower housing market inflation than a fall in prices.
Nationwide executive director Stuart Bernau says: “We think the likelihood of a crash is very small indeed. It is much more likely that we will see a period of stability or lower house price inflation.”
IFAs say there are no signs that the market is coming under the kind of pressure which would justify King's argument.
Savills head of residential research Richard Donnell says: “There will need to be forced sellers and repossessions for prices to fall and they are not likely to happen. Interest rates will put a squeeze on incomes but people are more likely to cut back on spending than on housing.”