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Bank of England policy maker David Miles said that Britain’s housing market is going through a “painful” transition and it’s highly unlikely that conditions will return to pre-crisis levels.
“Where we were in the years before the crisis was in retrospect completely unsustainable,” he said in an interview in London yesterday. “If you go from that situation to something that is going to be more sane and sustainable, that transition is going to be very painful.”
The U.K. housing market has seen a drop in the number of home sales as banks grant fewer mortgages and demand higher deposits, while the lack of supply helps support home values. Miles said it will take time for Britons to adjust to the fact that they needed to build up deposits of 15 or 20 percent, rather than borrowing the full value of a property.
“The level of transactions is dramatically lower than it was in the years leading up to the financial mess” and “net new mortgage lending remains very weak,” said Miles. “It’s a response to a movement from an unsustainable position, ultimately to something a bit more sustainable.”
Miles said that “one should anticipate a relatively slow transition back to normal in terms of transactions,” and that it isn’t “at all desirable or at all likely that we get back to the situation we were in, the bad old days.”
-- Editors: Craig Stirling, Eddie Buckle
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