The BBC suggest that this won't be the first tool used to cool the market
http://m.bbc.co.uk/news/business-27829744
Unfortunately, it seems that this government and the Bank of England have let house prices in London and the South East start to get out of hand and are now proposing the whole mortgage msrket suffers while they look for the cure. The cure, by the way, is to build hundreds of thousands of new homes every year. I've said this several times before in this blog, but this is a long-term answer.
The short-term answer is to look at demand, whereas supply can only be dealt with over the longer term.
Housing demand can be cooled by threats and warnings, but these will create a quickening of the bubble as people decide to act quickly before prices rise even higher and before regulations make buying more difficult. A gentler cooling of demand in certain parts of the country, coupled with a more drastic drop in demand in London will be the most desirable outcome.
The only wag to achieve this is to treat London as a separate market - change regulations and restrictions there (say within the M25) to create an immediate slowdown in prices. Changes to achieve this could include-
Higher stamp duty rates
Enforced lower income multiples
Higher Capital Gains Tax
Regulations to stop properties being turned around quickly
Regulated rents to ensure 'Generation Rent' can afford to live in London
Restrictions on overseas buyers
Some of these measures as a direct strategy to deal with the runaway house prices in London and the South East may just save this government in next year's election.
