No signs of housing bubble according to Bank of England

The Bank of England’s Ben Broadbent today tried to ease fears of a bubble in the housing market, saying there were no signs of a dangerous boom in credit.

The Bank of England’s Ben Broadbent today tried to ease fears of a bubble in the housing market, saying there were no signs of a dangerous boom in credit.

His comments came amid rapid growth in London property prices — rising at a rate of 18% a year whereas average prices across the rest of the country have continued to rise at nearly 10%.

Interest rates have remained at 0.5% since March 2009 but economic recovery and the Government’s Help to Buy scheme have stoked a housing market revival.

Broadbent, soon to become a deputy governor at the Bank, said: “Bubbles are things that are far easier to identify after the event than at the time. What really matters for financial stability is not so much house prices per se, but whether they are accompanied by rapid growth in credit — particularly high loan-to- value credit. That’s not happening at the moment but it is something that the Bank, and the Financial Policy Committee in particular, will want to keep an eye on.”

He added that the Bank is refocusing its Funding for Lending Scheme on small business credit rather than home loans. The FPC has also made moves to tighten the mortgage market by pushing up underwriting standards for loans.

Broadbent stressed again that the Bank would raise rates “gradually” but would not comment on the exact timing of a rise in rates, at present priced in for February next year.