Carney issues warning on housing market

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Bank of England governor Mark Carney has warned rapid increases in house prices and mortgage lending pose the biggest current risk to the UK economy, and says the Government has approached the Bank about changing the terms of Help to Buy.

In an interview with Sky News yesterday, Carney said there are “deep, deep problems” in the housing market, highlighting the supply shortages that have sent prices rocketing. He said: “The issue around the UK housing market is that there are not sufficient numbers of houses being built.”

He also said the Bank of England was not in a position to fix the problem, saying: “We are not going to build a single house at the Bank of England. We can’t influence that.”

Carney said the Bank was also considering changing the terms of Help to Buy, following an approach by Chancellor George Osborne.

He said: ”We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice. The Chancellor has asked us if we would provide advice on changing the terms of Help to Buy.”

The number of large mortgages being issues to buyers is increasing and Carney said the Bank has concerns about this rise, and that it is something that is being monitored closely.

Carney said he is concerned about the increase in mortgage debt being taken on but that the Bank can only influence whether UK lenders are sufficiently capitalised against the risk being assumed in the housing market.

He said: “The biggest risk to financial stability, and therefore to the durability of the expansion, centres on the housing market and that’s why we’re focused on that.”

Government initiatives such as Help to Buy and the Funding for Lending scheme – which is now closed for mortgage lending – have increased the availability of mortgage finance.

As a result, first-time buyers as well as homemovers have been returning to the market at the fastest rate since before the crisis, pushing house prices up.  According to Nationwide, house prices in April were up 10.9 per cent year-on-year.

In March, Chancellor George Osborne pledged in his Budget speech to get “Britain building again” with industry analysts calling for at least 200,000 new homes to be built per year to meet current demands.

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Readers' comments (25)

  • Sam De Zoysa

    “The issue around the UK housing market is that there are not sufficient numbers of houses being built.”

    Or more accurately insufficient numbers in places where people want to live.

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  • DH

    Said it before and will say it again; the way we facilitate mortgage lending in this country is all to cock, it needs radicle change ? and it needs to come from government, not via regulatory change or thematic reviews !!!

    Also I don't believe turning to country into a huge housing estate will solve any problems, if we haven't got enough houses to go round then we must be over populated ?

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  • Hector's House

    Why doesn't Mr Carney introduce measures to stop overseas buyers 'parking their money' into London Property?

    This is the main cause of the current property price bubble.

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  • Peter Herd

    More tough talk what is needed is action!

    The problem of housing is not just supply but speculators e.g. buy to let owners. In the 80s the government change the taxation system and lending system to encourage homeownership. This was okay when people were buying houses for their own residency but the system needs changing to discourage buy to let owners as they are driving up both house prices and rents.

    Yes we need to build more houses and in fact I think it’s come for the government to take direct action and start building social housing on a massive scale.

    I also believe that government need to change the tax system, one of the first things I would do is to stop giving tax relief on loans connected to buy to lets. I suspect you would have a flood of property onto the housing market if this simple change was enacted in the next budget. Giving homeownership a realistic chance to millions of individuals who are forced to rent due to high property prices and high rents. For far too long government has allowed house price inflation to spiral out of control since 1997 primarily due to an increase in buy to let investors and this boil needs bursting.

    Drive behaviour by changing the tax system simple!

    I think that we also need a system of the right to longer leases and an independent rent review board pretty much like the one for commercial property.

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  • GP Styles (GPS Economics)

    Carney is very late to this issue. The lights have been flashing red since last summer.... but perhaps he has only just realised that if it gets ugly after the General Election in 2015 he will be right in the firing line.

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  • The so called house price bubble is not spread across the UK evenly - most of the hlep to buy (75%) is outside of London and the SE in areas where there is no great heating up! Bringing in measures across the entire system is not what is needed. I really dont know where the evidence is about the large mortgages being taken on is based on - the MMR should make these affordable.

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  • Ken Durkin

    When I read stuff like this I can understand why those who live in Scotland could be tempted to shake off London. People who live in the London bubble just don't get it do they? It's another world! The fact is, those who are charged with some responsibility haven't got a clue how to deal with it. The textbooks don't exist.

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  • Sam De Zoysa


    Respectfully, I couldn't disagree more. The public view BTLs as the most attractive retirement planning strategy because simply don't appeal.

    To prevent a business from offsetting expenses namely loan interest is a nonsense. a growing segment of the population are renters because they have neither sufficient income nor equity to borrow and buy, preventing individuals from meeting the demand for rental accomodation from those people helps no-one.

    Building an order magnitude more is the only answer, mostly on greenbelt and up much higher and more widely in London.

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  • Sam De Zoysa

    Sorry should have said Pensions don't appeal. We can thanks successive governments for that but the public must not be prevented from planning for their retirement in any way they see fit no matter how misguided.

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  • Once again the economy is potentially set to suffer due to the housing market in the South East.

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