The governor of the Bank of England has warned that house prices pushed up by a shortage of new homes is that biggest threat to the UK’s economic recovery.
Speaking to Dermot Murnaghan for Sky News, Mark Carney said that rapidly rising house prices were the result of structural problems in the housing market without sufficient new homes being built.
He voiced concerns that the rise of high value mortgages of more that four times the borrowers salary were on the rise and threatened to destabilise the UK’s economic recovery,saying:
“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 focused on that. 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 have seen that creeping up and it is something we are watching closely.”
Carney’s comments about the housing market come after he downplayed the possibility of raising interest rates to cool the rise in house prices during the Bank of England’s inflation report last week.
The bank is also reviewing the government’s Help to Buy scheme at the request of George Osborne, due to concerns that the programme may be encouraging people to take on unaffordable mortgages.
