YES Howard Archer House prices are not yet a major concern outside London, and market activity isn't unduly strong compared to long-term norms. But the risk of a damaging bubble is very real. In this context, chancellor George Osborne's decision to give the Bank of England further macro prudential powers to counter risky mortgage lending is welcome. It's important that the Bank has as large an arsenal of weapons as possible, and equally important that it is prepared to use them in a timely fashion. There is no guarantee, of course, that a bubble can be avoided. But it's notable that the introduction of tighter regulations on mortgage lending, under the Mortgage Market Review, has at least had a temporary effect in slowing lending. If needs be, the Bank should use its enhanced macro prudential tools, in tandem with gradually tightening monetary policy, to contain the housing market.
Howard Archer is chief European and UK economist at IHS Global Insight.
NO Jason Hollands The chancellor's announcement, paving the way for curbs on mortgage lending, may help prevent future housing bubbles. But with regards to the current one, it is a case of acting after the event. London prices have rocketed by around 20 per cent over the last year, fuelled by Help to Buy and Funding for Lending, which have led to a gross misallocation of capital. It's in the chancellor's interest to try and cool the market down, rather than risk it bursting on the eve of the general election. There have been tentative signs that London price rises have begun to soften, probably down to a combination of foreign investors becoming less enamoured with rising prices, exacerbated by the strength of sterling. And perhaps the message is sinking in that rates are going to rise sooner than most have expected. But the real action that is needed is to increase supply. Restricting credit is just treating a symptom, not the cause of the problem. Jason Hollands is managing director at BestInvest.