Frankish cautions that many commentators appear to have misconstrued the governor’s remarks - made to delegates at a Scottish CBI dinner last week - as indicating that the Bank is expecting property prices to fall significantly in the short to medium term. “In actual fact Mr King said that there are ‘some early signs of a slowdown in the housing market’. He did not say that there would be a price crash,” stated Frankish.
“The governor went on to stress that borrowers should look properly at what the market is likely to do. In other words, people should make sure that they can actually afford to service their mortgage debt especially if rates rise further as predicted later in the year,” added Frankish. “The whole basis of what Mr King was saying is that the housing market needs to slow down in a controlled manner - something that the latest RICS house sales figures are starting to indicate. What he did not say is that the Bank is expecting house values to collapse as some have interpreted.”
