Concerns over rising UK house prices have recently led some economic commentators and MPs to argue for a rise in interest rates. However, Mark Carney, the Governor of the Bank of England, has ruled out an interest hike as a cooling off measure.
Cheaper mortgages have led to a surge in activity in the UK’s housing market, fuelling sustained price rises. An increase in house building is still nowhere near the level required to meet current demand, which is further boosting prices.
Fears of a housing bubble have been well publicised and have been voiced by Carney too, but he does not see a rise in interest rates as a solution.
Carney said “to rush to a more extreme response [i.e. interest rate increases]” would be a mistake, particularly when the UK was experiencing continuing high unemployment and slow growth in key export markets.
The organisation that represents estate agents and surveyors, the Royal Institution of Chartered Surveyors, said that its members’ expectations of future property price growth had hit a 14-year high.
However, MPs on the treasury select committee have voiced concern over rises, with Conservative MP Brooks Newmark suggesting that recent economic progress could be “undermined” by any housing bubble, because of the associated increase in household debt.
In response, Robert Chote, the head of the Office of Budget Responsibility, said that rises could be due to market forces, and may be followed by wage increases.
Increased activity in the housing market is of course good news for those looking to sell their property – particularly those who have been trying to do so for a prolonged period (this might include some of our unoccupied property insurance customers).
And in a country where property is so important, house price increases appear to be boosting that all-important ‘feel good’ factor for the wider economy