The Bank of England has been accused of “self-interested policy making” that could yet damage the “still buoyant” housing market.

Lloyd Davies, chairman of the Conveyancing Foundation and MD of Convey Law, recently slammed the Bank of England’s continued rise in interest rates as “inflammatory nonsense” and said that “trigger happy doom-mongering” could damage the housing market and therefore the UK economy.

However, Davies has welcomed the relaxation of stress tests for mortgage borrowers to “give a welcome boost to first-time buyers”.

Speaking this week, he said: “The mortgage stress test was a clear barrier for many borrowers. It was effectively brought in as a reaction to the 2008 financial crisis when widespread mortgage mis-selling led to the housing market crashing and therefore the economy.

“However, the insistence on lenders testing whether potential mortgage holders could cope with a 3% interest rate instead of the current one meant that many people who could easily afford a mortgage at the recent rates – which have been low for some years – were being denied a mortgage just on the strength of future affordability probability.

“For many people, particularly those who were first-time buyers or relatively new to the property ladder, these stress tests were grossly unfair as they were effectively subjective. Relaxing it will clearly help to encourage first time buyers and increase their chances of being allowed a mortgage which will provide an injection to the housing market.”

But Davies, said the measures, although welcome, would be a “drop in the ocean” if “rampant interest rate rises continued unchecked” and said the Bank’s sixth rate rise in a row since December 2021 earlier this month was not tackling inflation but would damage the housing market.

He commented: “The latest interest rate rise to 1.75%, is irresponsible and unnecessary. These rapid and sustained hikes are what will drive us to recession. They are being billed as necessary to curtail inflation but I do not believe that and believe that they ‘per se’ will drive us to recession.

“The government should be doing everything it can to keep the housing market on the up but these continued interest rate rises could have a significant effect on the housing market and, if the housing market declines, then so will the rest of the economy, putting us into a recession.”

He added: “Inflation is inevitable after several lockdowns and the government printing money for the last two years to combat the Pandemic and so there is no need for ridiculous interest rate increases.

“Thankfully, these increases have coincided with the relaxation of the stress tests for mortgage borrowers and so I think that the housing market will still remain buoyant this year and next as house prices will continue to increase and mortgages are still cheaper than rents.  This will be reversed if the Bank of England continue with this self-interested policy to fill their coffers with increased interest payments from borrowers.”

“The clear alternative to increasing interest rates to bring down inflation should be to curb the cost of fuel by putting a cap on this with the fuel companies who are making a fortune despite the cost of oil not having increased,” he added. “I believe that is what most people are screaming out for in the face of the exponential growth in oil and gas companies’ profits not to mention the eye-watering salaries of their top executives.”