This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/2014/may/18/mark-carney-house-prices-risk-economy-bank-of-england

The article has changed 4 times. There is an RSS feed of changes available.

Version 1 Version 2
Mark Carney: rising house prices pose biggest risk to recovery Mark Carney: rising house prices pose biggest risk to recovery
(about 1 hour later)
The housing market poses the biggest risk to Britain's economic recovery as a shortage of new homes drives up prices, the governor of the Bank of England has warned.The housing market poses the biggest risk to Britain's economic recovery as a shortage of new homes drives up prices, the governor of the Bank of England has warned.
Mark Carney said steeply rising house prices were caused by structural problems in the housing market that restricted the supply of homes.Mark Carney said steeply rising house prices were caused by structural problems in the housing market that restricted the supply of homes.
With families unable to afford a home without taking on ever larger mortgages, the Bank of England could be forced to tackle lenders that offer risky loans.With families unable to afford a home without taking on ever larger mortgages, the Bank of England could be forced to tackle lenders that offer risky loans.
Speaking on the Sky News Murnaghan programme, Carney said the central bank was unable to solve the shortage of new houses. He said the rate of housebuilding was half that in his own country, Canada, despite the UK having a population twice the size.Speaking on the Sky News Murnaghan programme, Carney said the central bank was unable to solve the shortage of new houses. He said the rate of housebuilding was half that in his own country, Canada, despite the UK having a population twice the size.
David Cameron responded to Carney's comments by saying he was well aware of the need for more new homes, which was why he had simplified the planning process in favour of developers. He said that as a result there was more new homebuilding than at any time since the recession.David Cameron responded to Carney's comments by saying he was well aware of the need for more new homes, which was why he had simplified the planning process in favour of developers. He said that as a result there was more new homebuilding than at any time since the recession.
Carney made the headlines last week when he played down demands for an early interest rate rise. Some economists have called on the bank to raise rates to cool the housing market and temper economic growth, which is running at more than 3%.Carney made the headlines last week when he played down demands for an early interest rate rise. Some economists have called on the bank to raise rates to cool the housing market and temper economic growth, which is running at more than 3%.
In a speech to accompany the central bank's quarterly inflation report, Carney said the recovery remained vulnerable to shocks and the economy, with more than two million people unemployed and many households still with high debts, needed a longer period of cheap credit.In a speech to accompany the central bank's quarterly inflation report, Carney said the recovery remained vulnerable to shocks and the economy, with more than two million people unemployed and many households still with high debts, needed a longer period of cheap credit.
In the interview he said the Bank of England was watching to ensure the banks had enough reserves to withstand the risks of bad loans should the housing market suffer a downturn. It was also checking lending procedures to try to ensure that mortgages were only issued to people who could afford them.In the interview he said the Bank of England was watching to ensure the banks had enough reserves to withstand the risks of bad loans should the housing market suffer a downturn. It was also checking lending procedures to try to ensure that mortgages were only issued to people who could afford them.
"By reinforcing both of those we can reduce the risk that comes from a housing market that has deep, deep structural problems," he said."By reinforcing both of those we can reduce the risk that comes from a housing market that has deep, deep structural problems," he said.
Nevertheless, he said there was evidence that large-value mortgages – with loans of more than four times a borrower's salary – were on the rise again, with the risk that they could destabilise the economy.Nevertheless, he said there was evidence that large-value mortgages – with loans of more than four times a borrower's salary – were on the rise again, with the risk that they could destabilise the economy.
"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," he said. "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."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," he said. "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.""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."
The Bank of England has already begun a review of the Treasury's Help to Buy scheme at the request of the chancellor, George Osborne.The Bank of England has already begun a review of the Treasury's Help to Buy scheme at the request of the chancellor, George Osborne.
Osborne, who is equally concerned to stall an unstable house boom, wants the Bank to see whether the scheme, which underwrites mortgage deposits mainly for first-time buyers, is encouraging people to take on unaffordable homes.Osborne, who is equally concerned to stall an unstable house boom, wants the Bank to see whether the scheme, which underwrites mortgage deposits mainly for first-time buyers, is encouraging people to take on unaffordable homes.
Nigel Lawson, a chancellor during Margaret Thatcher's time as prime minister, said Carney had been given the responsibility to advise the government over the scheme and should stop "bleating about it" and make a decision.
He added he would like to see Help to Buy phased back or brought to an end, plus a 0.25% rise in the official interest rate before the end of 2014.
The Tory peer, now known as Lord Lawson of Blaby, told BBC Radio 4's The World This Weekend: "I think [Carney] is absolutely right to express his concern but George Osborne has very sensibly charged the Bank of England with the responsibility of telling him when Help to Buy should be either phased back or ended altogether.
"So really the ball is in Mark Carney's and the Bank of England's court, and the question is if he is advising the chancellor that the time has come – and I think it has myself – to scale it back or indeed end it altogether, and if not why not.
"He's not just a commentator like you or I. He has a responsibility to discharge and the question is is he doing that?"
Lawson said he was sure the government would accept the advice if Carney called for the scheme to be scaled back or ended.
He said: "They wouldn't argue. They would accept it. That's the reason why they asked him to advise them, so it's up to him to decide is he going to do it or not.
"I think just sort of bleating about it, however well justified his views are, is not really what he should be doing."