Bank of England warns of housing crash

The deputy governor of the Bank of England has made its strongest warning yet of the dangers that could be brewing in the housing market.

Live updates

PM: I would consider changes to Help to Buy scheme

David Cameron said he would consider changes to the Government's Help to Buy mortgage scheme if advised to do so by the Bank of England.

The Prime Minister says he would consider changes to the 'Help to Buy' scheme if advised by the Bank of England.
The Prime Minister says he would consider changes to the 'Help to Buy' scheme if advised by the Bank of England. Credit: PA

When asked on Radio 4's Today show if the Government would think about changing the mortgage guarantee scheme to reduce its upper borrowing limit, the Prime Minister replied: "Of course. We will consider any changes that are proposed by Mark Carney."

The Bank of England's Governor said at the weekend that the bank is looking at new measures to control mortgage lending amid a shortage of home building.

The Help to Buy mortgage scheme lets people buy property worth up to £600,000 with deposits as a low as 5%.

More: Nick Clegg heeds Carney's warning on housing boom

House sellers' asking prices reach record high

House sellers' asking prices went up 8.9% in the last 12 months, meaning the average property is on sale at a new record high of £272,003.

  • In London, asking prices went up 16.3% in the last year
  • Compared with 4.9% across the rest of the country
  • Ten out of 32 boroughs in London say annual rises of more than 20% - with a 43% increase in Tower Hamlets driven by cash buyers.

Watch: Clegg says government should listen to Mark Carney housing warning

Advertisement

Clegg hears Carney's warning on 'Help to Buy' scheme

Deputy Prime Minister Nick Clegg told ITV News the government may have to scale back its flagship 'Help to Buy' housing policy.

Nick Clegg said a warning from the Governor of the Bank of England - that booming house prices are a threat to economic recovery - must be heeded.

Watch: Carney should have final say on Help to Buy

In comments that appear to contradict Chancellor George Osborne's defence of the programme, Mr Clegg said: "If Mark Carney - in view of his concerns about the housing market - thinks we should scale back on some of those schemes, that's exactly what we should do."

Deputy Political Editor Chris Ship reports.

More: Carney 'absolutely right' Britain needs more houses

Carney 'absolutely right' Britain needs more houses

The Bank of England has the powers to prevent a new housing "bubble" developing, the Prime Minister said, after its governor Mark Carney suggested it was the biggest risk to economic recovery.

Prime Minister David Cameron agrees that Britain needs to build more houses. Credit: PA

Speaking to Sky's Murnaghan programme, David Cameron said: "We have given the Bank of England the duty to make sure that bubbles are dealt with in the economy. They have all the powers they need to do that.

"He (Mr Carney) is absolutely right when he says fundamentally we need to build more houses in Britain".

Read: Booming house prices 'put Britain at risk'

Government's Help to Buy scheme 'unwise'

Mark Carney warned property prices pose a risk to the economy.
Mark Carney warned property prices pose a risk to the economy. Credit: Dominic Lipinski/PA Wire

The Government's "unwise" Help to Buy scheme has been criticised amid the Bank of England governor's warnings of a property "boom".

Sam Bowman, research director of the Adam Smith Institute, said: "Mark Carney's comments on house prices are timely and accurate: the house price boom in London, the south-east and the East Midlands is fundamentally down to a lack of housing."

He added that the "supply-side crisis" meant it was up to the Government - not the Bank - to bring prices under control, and called for a rolling back of the green belt to create space for one million homes.

Mr Bowman said that while Help to Buy was "probably too small to make a substantial difference to house prices" it was "inflating demand without increasing supply".

Read: Booming house prices 'put Britain at risk'

Balls: Interest rates could rise if 'boom' not halted

Labour has committed to building 200,000 homes a year by 2020.
Labour has committed to building 200,000 homes a year by 2020. Credit: Stefan Rousseau/PA Wire

Ed Balls has warned that interest rates may have to rise if the government does not act to ease the current property "boom".

The Shadow Chancellor said: “Mark Carney is right to warn about the risks to our economy of a lop-sided housing market where housing demand hugely outstrips supply.

Mr Balls said the Governor's comments put the ball in George Osborne's court, adding that the Government should cut the Help to Buy limit to £600,000 and introduce an additional "Help to Build scheme".

“Unless the government acts the danger is that the Bank of England will be forced to raise interest rates prematurely.

Read: Booming house prices 'put Britain at risk'

Advertisement

Help to Buy 'providing desperately needed homes'

The government's controversial Help to Buy scheme is "providing desperately needed homes", the association representing property builders has said.

Home Builders Federation Executive Chairman Stewart Baseley said: "The Help to Buy Equity Loan scheme has supported demand for new build homes and its extension provides certainty about longer-term demand.

Mr Baseley said the scheme is helping the industry "plan ahead, rebuild capacity lost in the downturn and deliver".

Read: 'Booming' house prices 'put Britain at risk'

Clegg: Carney should have final say on Help to Buy

Nick Clegg has told ITV News Mark Carney should have the final say on whether the controversial Help to Buy scheme should be scaled back.

In comments that appear to contradict Chancellor George Osborne's defence of the programme, Mr Clegg said: "If Mark Carney - in view of his concerns about the housing market - thinks we should scale back on some of those schemes, that's exactly what we should do."

Help to Buy could be 'pared back', Clegg says

The government housing scheme blamed by some for inflating house prices should be "pared back" if the Bank of England advises it, Deputy Prime Minister Nick Clegg has said.

In a BBC One interview, Mr Clegg said: "If [Bank of England Governor Mark Carney] says we should pare back on some government schemes like Help to Buy then I think we should do that.

"He's certainly right when he says the big problem is that we simply don't build enough homes in this country," the Lib Dem leader added.

Read: Housing market boom 'biggest risk' to economic recovery

House prices up 12% in last five years

A graph shows average annual price changes in the last five years.
A graph shows average annual price changes in the last five years. Credit: Land Registry

Property prices in England and Wales have increased by 12% since they bottomed out five years ago.

According to figures from the Land Registry, average the value of the average home stood at £169,124 in March this year.

That is up from £150,490 in April 2009 - the lowest point following the crash that began a year earlier.

Price increases have been quickening as the economic recovery has taken hold, with stronger demand leading to a surge in values.

Read: Housing market boom 'biggest risk' to economic recovery

Load more updates

Advertisement

Today's top stories