Bank chief dismisses housing bubble fear as ‘hype’

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Fears of a housing bubble have been dismissed as “hype” by a key Bank of England policymaker, just days after governor Mark Carney said the Bank was prepared to intervene to cool an overheated property market.

The remarks by Paul Fisher appear to suggest that conditions are a long way off a point where the action threatened by Mr Carney to keep a lid on unsustainable price growth would be necessary.

His comments in a newspaper interview come as Halifax figures showed house prices were 5.4 per cent higher than last summer as activity intensifies.

Mr Fisher, the Bank’s executive director for markets, acknowledged that it was “crucial” to keep an eye on house prices but added: “So far, I don’t see evidence of any bubble behaviour.”

He told the Sunday Times the market had been suffering for many years from very low transactions with price rises well below the inflation rate and that housing supply was likely to increase as the market picked up.

Mr Fisher added: “What I see at the moment is a lot of media hype about some of the hotspots in London, which are really there for local reasons.

“It’s when you start hearing of the 105 per cent or 110 per cent loan-to-value ratio, or £200,000 for the shed at the bottom of the garden, that you start to get worried.”

The property market has been buoyed by the Government’s Help to Buy scheme as well as the Bank of England’s Funding for Lending initiative designed to ease borrowing conditions for households as well as small businesses.

In a recent speech to business leaders, Mr Carney acknowledged fears that such conditions, amid persistently low interest rates, could lead to concerns about the housing market.

He said the Bank was “acutely aware” of the risk of unsustainable house price growth and was closely monitoring the resurgent property market which had seen home loans approvals rise by 20 per cent in the past year.

Mr Carney said his officials were now in a position to supervise borrowing in specific sectors more intensively and said lenders could be asked to restrict loan terms or even forced to hold more cash on balance sheets to dampen down an over-heated market.

The governor did not go into further detail about the parameters for taking such action but Mr Fisher’s remarks appear to suggest that policymakers currently consider conditions for the intervention are a long way from being met.