An indicator for house prices in the UK improved to its highest level in two and a half years in December on rising optimism stemming from lending scheme, a survey by the Royal Institution of Chartered Surveyors (RICS) showed Tuesday.
The RICS house price balance improved to zero in December from -9 in November. This was the strongest reading recorded by RICS since June 2010. Economists expected a modest uptick to -8.
Also, a measure of house price expectations over the next three months rose to 1 from -5. This was the first time that the balance moved to the positive territory since May 2010, RICS said.
“Confidence in the housing market does appear to be improving, helped in part by the impact of the FLS (Funding for Leading Scheme),” RICS Global Residential Director Peter Bolton King said. “It may be that we are now over the very worst,” he added.
The Bank of England launched its Funding For Lending Scheme in August, providing cheap funds to banks with an intention to encourage them to lend more.
In a report published in December, RICS said house prices will likely see an increase of 2 percent in 2013 and the cost of renting a home should rise by around 4 percent.
According to a draft policy statement published on Monday, the Bank of England’s Financial Policy Committee will be given powers to give directions setting extra capital requirements for the purposes of financial stability.
The FPC’s main task is to remove or reduce systemic risks to protect the financial system, with specific powers to tackle cyclical risks, such as those arising from unsustainable levels of leverage, debt or credit growth.
With this powers, the FPC would be able to raise the countercyclical capital buffer (CCB) or sectoral capital requirements (SCRs), demanding banks to have a larger capital buffer to absorb unexpected losses, whenever threat to financial stability emerge.
Under the draft legislation, the FPC will be able to adjust SCRs for banks’ exposures to three broad sectors such as residential property, including mortgages with high loan to value or loan to income ratios at origination; commercial property; and other parts of the financial sector.
These powers are expected to help the central bank limit the rise in house prices, by restricting mortgage lending, if the need arises.
by RTT Staff Writer
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