Britain’s housing market is picking up speed and while there is no sign yet of a price bubble, borrowers and lenders should beware of overstretching themselves, a Bank of England policymaker said yesterday.
Paul Fisher, the Bank’s executive director for markets, said: “Let me assure you that the Bank will not be complacent about allowing financial stability risks to build through an over-expansion of the housing market.
“Both borrowers and lenders need to be careful not to over-stretch themselves.”
House prices rose at their fastest annual pace in more than three years in September, according to data from mortgage lender Nationwide last week. The launch next week of a government mortgage guarantee programme has added to concerns that prices might rise too fast.
Fisher also said a rise in short-term UK interest rates in financial markets in recent months may have been exacerbated by poor liquidity and he said they could break free of the influence from US rates which rose on expectations that the Federal Reserve would begin to slow the pace of its stimulus.
“The correlation in short rates between the UK and US is unhelpful given the relatively subdued recovery in the UK and… somewhat puzzling,” he said. “It may well be that these rates decouple in future as liquidity improves and the outlook for each economy develops further.”
Fisher, like other Bank policymakers in recent weeks, used his speech to defend its new “forward guidance” strategy of linking record-low interest rates to a fall in the unemployment rate to 7 per cent.