BoE considering new measures to control mortgage lending: Mark Carney, BoE governor
19 May 2014
Bank of England governor Mark Carney warned yet again about the risks of a housing bubble said the bank was considering new measures to control mortgage lending amid a shortage of home building.
The UK housing market had "deep, deep" structural problems, with deficient new home construction activity, Carney said in an interview with Sky News television broadcast on Sunday.
"When we look at domestic risk the biggest risk to financial stability, and therefore to the durability of the expansion, those risks centre in the housing market and that's why we are focussed on that," he said.
UK house prices shot up 10 per cent in the 12 months to April, boosted by a recovering economy, low interest rates and government schemes to help home buyers. This had led to concerns that buyers would take on too much debt.
Carney had earlier said the bank would seek to use its new powers over credit before it resorted to increasing interest rates.
According to Carney, he saw the biggest problem in the property market as the shortage of new homes. He pointed out that as many houses were built each year in his native Canada as in the UK, which had double the population.
"We don't want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term.
"We would be concerned if there were a rapid increase in high loan to value mortgages across the banks ... we've seen that creeping up and it's something we're watching closely."
Carney added that the UK housing market had "deep, deep structural problems", which the bank could do nothing about.
Agreeing with Carney's assessment, Prime Minister David Cameron, however, said the Bank of England had the tools at its disposal to prevent housing bubbles.
He said the government had given the Bank of England the duty to make sure that bubbles were dealt with in the economy. He said the bank had all the powers they needed to do that.
Carney suggested that the Bank of England could introduced a new "affordability test" for borrowers, and also reduce the government's controversial Help to Buy scheme.
"We could do more, we could take steps around affordability to test whether or not individuals can test mortgages at much higher interest rates," he told Sky's Dermot Murnaghan programme.