“Policy makers have limited options left to get the economy and housing market moving again. Rates can’t be cut, government spending is going to fall, taxes are on the up. Boosting money supply is the only tool left in the kit. At the moment lenders are being called upon to inject fresh finance into the market but at the same time being forced by regulation to hold onto a greater proportion of their capital, causing them to tighten lending criteria. The consequences for the mortgage market are that for the first time in six months, the average loan to value is decreasing again, and lending volumes are depressed.
“Any further tightening of credit conditions stands to expose vulnerabilities in the housing market and economy, and, especially with the prospect of further cuts to come, the government needs to take action to release this pressure. The Bank of England should have restarted quantitative easing today.”
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