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BoE will act to prevent housing market reaching ‘warp speed’

Bank of England governor Mark Carney has suggested that interest rates are unlikely to rise soon but says the bank is prepared to act to avoid the housing market reaching “warp speed”.

Speaking at the Economic Club of New York this week, Carney said rate rises will not necessarily follow if the rate of unemployment falls more quickly than expected.

He said: “It is unlikely that equilibrium interest rates will return to historically normal levels any time soon.

“This prospect [of low interest rates for a long time] puts a premium on macroprudential policies and financial reforms to manage the associated risks without abandoning the need to keep interest rates in line with the equilibrium level.”

Carney suggested the Bank could use tools other than interest rates to stem house market growth, such as tougher lending requirements.

He added: “There is a history of things shifting in the UK and the housing market, of moving from stall speed to warp speed and underwriting standards slipping. So we want to avoid that.”

John Charcol senior technical manager Ray Boulger says: “Clearly the speech highlights that the Bank has other tools to try and calm the markets and it also needs to keep the base rate low to stimulate activity.

“From the mortgage market perspective, the main thing here is if the Bank feels the need to control the housing market, it will do it in a way other than raising interest rates.”

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