News Column

IMF flags worry over UK house price increases

June 7, 2014

PETER SPENCE



THE INTERNATIONAL Monetary Fund (IMF) delivered the strongest warning yet from an international organisation about the risk of a property price bubble in the UK, though it said there have been few signs of a credit-driven bubble in house prices so far.


"House price inflation is particularly in high London, and is becoming more widespread", said the IMF in the concluding statement to its annual report on the UK economy, published yesterday.


While the IMF doesn't see much evidence of a credit-led bubble at this point, it nonetheless warned that steady increases in the size of new mortgages compared with borrower incomes "suggests that households are gradually becoming more vulnerable to income and interest rate shocks".


Speaking on BBC Radio earlier, Osborne voiced agreement with IMF managing director Christine Lagarde, saying that the government needs "to be alert to the build-up of debt in the housing market".


He told listeners that he has "given the Bank of England tools to do the job, and they should not hesitate to use those tools if they see these developments turning into a risk to the British economy."


But a Bank of England official said yesterday that while the central bank will examine risks from rising house prices, it cannot tackle the issue of surging prices directly.


"It's the risk from the rise from housing that we are focused on, as opposed to house prices themselves," Paul Fisher, deputy head of the BoE's Prudential Regulation Authority, said.


"House prices may go up or down for good reasons. The question for us is are households going over-indebted, are banks over-stretching themselves too much. That's the risk which we will be trying to address," Fisher said.


The Bank's Financial Policy Committee, which monitors threat to the financial system's stability, meets on 17 June.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: City A.M. (UK)


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