Vince Cable dramatically intervened in London’s housing market today, calling for mortgages to be scaled back to around three times income.
Warning banks not to “throw petrol on the fire”, the Business Secretary stressed the housing boom in the South-East must not be allowed to destabilise the wider British economy.
He said: “The desires of individuals have to be balanced against the stability of the economy as a whole.”
Amid fears that such a tight limit on mortgages could force even more Londoners out of the housing market, the Liberal Democrat Cabinet minister was swiftly slapped down by a senior Treasury source.
His comments came just hours before Chancellor George Osborne’s Mansion House speech.
“We have given the independent Bank of England new powers and responsibilities to control mortgage lending through the new Financial Policy Committee,” the source said.
“It’s not for politicians to make specific suggestions, just as politicians shouldn’t make public recommendations about interest rates.”
A survey from estate agency group LSL Property Services is tomorrow expected to reveal a rapidly cooling London property market, with prices falling in central London boroughs such as Kensington & Chelsea, Hammersmith & Fulham and Islington.
In further evidence of the slowdown, figures today revealed more surveyors reported a fall in enquiries than a rise in May, according to the Royal Institution of Chartered Surveyors.
Many banks have already reduced loan-to-income ratio towards four.
But Mr Cable said: “Traditionally most of us who been through housing booms in the past have recognised that a stable level is about three, three-and-a-half, times peoples’ income.”
He also appeared to hint he would like to see a fall in “unhealthy” house prices in many parts of London and called for a building boom.
