There is palpable renewed confidence in the UK economy since Mark Carney took over as Governor of the Bank of England. His forward guidance that the record low interest rate of 0.5 percent would hold until such time as unemployment falls to 7 percent implies a very stable environment in which people can borrow and grow their businesses and add to their property portfolios.
Some forecasters believe we are in for another three years of this very favourable environment of low interest rates, and this has been registered by the pick up in the housing market. The FTSE has seen healthy volatility and seems to wear a rosy glow.
Rising house prices are of course not favourable to everybody, as a lot of people become sidelined, unable to buy even their first house while those who are already on the ladder bask in the glory of ownership or further improve their wealth by remortgaging and investing in the Buy-to-Let market.
This is where the government can bring in some mechanism where priority should be given to First Time Buyers and Growing Families Who Need to Move to a Bigger Property. That would bring a lot of stability to the market, and ensure a bubble is not created, where some people and corporations may prosper for the meantime but would not be appropriate for the economy long term.
The London housing market registered a gain of 0.9 percent last month, one of the healthiest gains for some time. The availability of mortgages and especially re-mortgages at record low interest rates is the cause for the euphoria.
If a mechanism is introduced through legislation to favour first time buyers and big families as I have suggested above, maybe it will turn into a celebration for more and more people. The housing supply would help those in need, and curb the unnecessary speculation. Payment of ever-growing rents from the public purse to buy-to-let owners is merely dishing out national wealth to a small minority of people, whose tenants become dependent on the social security for their lifestyle.
The interest rate is at a record low in response to a need for the economy to pick up, as a stimulus, and wealth will only be created when money is employed to create additional enterprise. In this respect, the banks will be doing their job fine if they pro-actively start to lend money to businesses and entrepreneurs in each local community, thereby enabling people make a living, create jobs in the local economy, and generally give a boost to the whole economy. When people are purposeful and busy, they have to use transport, buy food outside, dress up well and even buy a few luxuries.
The future looks rosy.