The FSA admitted it has been concerned for some time that house prices in London and the South ...
The FSA admitted it has been concerned for some time that house prices in London and the South East are as high in relation to the rest of the country as they have ever been.
In cautionary mood, Howard Davies, chairman of the FSA has noted that the multiples of salary at which many people have been prepared to borrow continues to rise. Davies warned: "Of course, with interest rates where they are the borrowing affordability index is still low. But that is no comfort to someone who loses his job and finds he has negative equity in a house he can no longer finance."
Davies made the statements yesterday during his speech to the CBI.
Commenting on the immediate outlook Davies said: "We can expect, I believe, a continued period of low inflation and perhaps a slow recovery. In those circumstances, it will be important for companies to be realistic and not to build plans for the future on the expectation of double digit growth in revenues. For individuals there is the same need for realism in both borrowing and investment decisions."
Despite the cautionary tone and insistence that investment returns forecasts be more realistic, Davies stressed he is not pessimistic. He said: "The British economy is in much better shape than it was in the early 1990s and our banking sector is strong and well capitalised - an important national asset in difficult times. So I forecast a challenging twelve months ahead, but not worse than that."
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