Bank of England urged to impose mortgage restrictions to freeze house prices for five years

Bank of England urged to impose mortgage restrictions to freeze house prices for five years

A prominent thinktank is calling on the Bank of England to apply mortgage restrictions to UK homebuyers, in order to prevent further house price increases for at least five years.

The Institute for Public Policy Research (IPPR) said the measures would help to end the reliance on property as the chief driver of the UK economy. It also claimed that mortgage restrictions and zero house price inflation would see the real term prices of houses fall by around 10 per cent, while wages rose, making property more affordable for those trying to get on the housing ladder.

Despite measures already taken to slow down the increase in house prices, such as additional tax on buy-to-let and second homes, they continue to rise. Although figures for June saw growth at its slowest in five years, there was still an increase of 1.9 per cent.

The author of the report, IPPR research fellow Grace Blakeley, said: “Since the 1980s, the UK’s business model has rested on attracting capital from the rest of the world, which it has channelled into debt for UK consumers. The 2008 crisis proved that this is unsustainable. We need to move towards a more sustainable growth model, one built on production and investment rather than debt and speculation.

“To do this we must break the cycle of ever-rising house prices driving property speculation, crowding out investment in the real economy.”

The Institute for Public Policy Research said that higher initial deposits and tighter ceilings on loan to income ratios were necessary to reduce average house prices, along with an increase in the number of houses being built.