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Vince Cable says interest rate hikes may be required

Interest rate hikes may be required to combat “a raging housing boom” in London and the South East, Business Secretary Vince Cable has warned. 

Speaking on the BBC1’s Andrew Marr Show yesterday, the LibDem MP suggested a housing bubble was growing in parts of the country.

He said the Bank of England may need to consider interest rate rises much sooner than it is currently planning, despite the effect it would have on the manufacturing sector and over-indebted consumers.

He said: “Of course, the danger of raising interest rates is that you hit those parts of the country which are not yet fully recovered and you push up the exchange rate; that hits manufacturing, we don’t want that.

”On the other hand, if you don’t increase interest rates, if that’s the way the Governor and the Bank of England go, then, of course, this boom that’s taking place in house prices gets out of control and the only people who can live in parts of London are foreigners and bankers, and we don’t want that either.”

Cable also said he believed the Government’s Help to Buy scheme may need to be reviewed following a warning from Standard & Poor’s which has raised “quite serous worries” about it. 

In confirming the UK’s AAA rating last week, S&P said net government debt will hit a peak of 89 per cent of GDP in 2015, a year earlier than expected.

“Relative to peers, we consider the UK to benefit from higher-than-average fiscal flexibility, meaning that under pressure the Government would be willing and able to increase tax pressure and/or cut public spending by at least 3 per cent of GDP in the short term,” S&P said.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. So the country’s economy is dictated to by house prices in the South East?

    The long held opinion that as far as Parliament is concerned the country is the South East is proven!

  2. @Sean

    I now live in London. I used to live in Manchester and I fear that you are perfectly correct. It was ever thus. When I started work in the North West (back in the late 690’s!!! The saying was that the money was made in the North and spent in the South. All that has changed is that our manufacturing has been trashed and now the money is largely made and spent in the south.

    Politicians won’t come up with a sensible solution as they have subsidised (by the taxpayer) mortgages. The easy way to stop runaway prices in the south is to:

    A. Make it a rule that to buy a property in the South you have had to be a resident in the South for ten years.
    B. Just increase the mortgage rate for all those living south of Watford.
    What’s the problem with that? It might even encourage people to live outside the ‘Sarf’.

  3. @Sean… yes once again the whole of the UK doffs its cap to the South East as they get property rich more as fluke of where they live rather than any deserving factor.

    A bit left wing but I’ve got just the remedy however… regional interest rates will work… the people in the North who benefit less from house price inflation pay a lower interest rate than in the South, which in turn helps to manage raging London house prices.

    Simples… if only it was thus!

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