Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Property

Housing market ‘a threat to stability’

Posted on April 30, 2014

A leading Bank of England official has warned that Britain’s housing market poses the biggest threat to its financial stability.

Spencer Dale, the Bank’s chief economist, said a meeting of the Financial Policy Committee in June would consider possible responses.

History showed that the UK housing market could switch from being “comfortably warm to dangerously hot in a relatively short period of time,” Mr Dale said in a response to a questionnaire from MPs.

    Mr Dale, who will take over as the Bank’s financial stability chief in June, said in testimony to the Treasury select committee that the housing market was not yet overheating. Mortgage approvals were still a third off their pre-crisis levels. But the BoE “should be nervous” about the pace of recovery.

    His words contrast with the Bank’s verdict in its November Financial Stability Report, when it stated that there was “little evidence” that housing posed an immediate threat to stability.

    Since then there have been signs of mounting inflation in the property market, with values rising at a 10 per cent annual pace.

    On Tuesday the BoE’s Prudential Regulation Authority put the property market at the heart of a tough set of stress tests aimed at gauging leading banks’ ability to weather a major downturn.

    The stress test scenarios included a 35 per cent crash in the housing market, as well as a 30 per cent fall in commercial property values.

    Mr Dale said in the parliamentary hearing that policy makers could not afford to sit back and let the housing market gains spin out of control, adding that if they waited until they were sure that a bubble had emerged it would be too late.

    Shortly after Mr Dale’s comments on the housing market, Andy Haldane, who is set to move from being head of financial stability to chief economist, made it clear that the central bank was not likely to raise interest rates soon. He is due to take up a seat on the Monetary Policy Committee in June.

    Cementing his dovish reputation in a written questionnaire, Mr Haldane made it clear that he sees the biggest risks to the economy are weaker conditions in other countries, financial market “dislocations”, or bubbles in asset markets which would damage medium-term growth prospects.

    Some investors are already anxious about prime central London property values. Grosvenor Group, the central London landlord owned by the Duke of Westminster and his family, cut its luxury housing development pipeline by £240m and sold off various assets in the centre of the capital during the 2013 financial year.

    Mark Preston, Grosvenor group chief executive, said: “We have been concerned about the level of property values in some markets, particularly in prime central London residential property.”

    The BoE’s Mr Dale said a question was whether there was a London-specific issue in housing or whether the strength would start spreading across the rest of the country.

    “We do need to be on our mettle on this,” he said.