Bank of England voices concerns over housing market
03 Jul 2014
Deputy Governor of the Bank of England (BoE), Sir Jon Cunliffe, has warned that the housing market poses the ‘biggest risk’ to the economy.
Sir John said a major threat was ‘prices rising faster than people’s incomes’, which could lead to ‘a big increase in the amount of debt in the economy’.
Recent figures released by Nationwide show that the average house price in London has risen to over £400,000 in the past year. In order to limit what they consider risky lending, the BoE laid out plans to prevent the housing market from getting out of control.
The measures included ensuring lenders check that applicants could cope if interest rates increased by three percentage points, and placing a 15% cap on the number of mortgages that can be given to applicants based on what they want to borrow.
Sir Jon said: ‘It’s not the risk around prices as such, it’s the risk that we get a sustained rise in house prices – and this is very important – house prices rising faster than people’s incomes’.