- David Tinsley at BNP Paribas
The U.K. economy is one of the fastest growing developed economies in the world. A rapid change in sentiment was made only during a several months' period, as in summer 2013 analysts were worried about the risk of falling into a triple-dip recession. Some claim the boost was mostly driven by a decline in savings rate and surging housing prices. The upcoming BoE deputy governor Ben Broadbent joined sceptics and claimed that constantly rising house prices will encourage more households to take mortgages, posing the biggest domestic threat to the nation's financial stability.
Analysts' main concern was linked to the house price boom in the capital, where homes valued at 10 million pounds and more rose 3.3% over the last year. Additionally, the average home price in London rocketed 17%. Meanwhile, a fresh report from the Royal Institution of Chartered Surveyors showed that demand for property in London has cooled slightly for the first time in two years, with a loss of sentiment expected to spread across all parts of the country. Even though home prices in the U.K. have reached record levels in May, RICS's members pointed out that banks have already been tightening lending following the implementation of the Mortgage Market Review, which is likely to boost price growth in south-east and cool it elsewhere. Such a measure will, in theory, lead to a more balanced recovery of the housing market.
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