The Bank of England should be prepared to introduce even stricter mortgage controls if the housing market looks to be over-heating, warns the International Monetary Fund.
Accommodative monetary policy is appropriate for now, given weak inflation pressures, but policy might need to be adjusted quickly if inflation takes off. Interest-rate increases may also need to be considered if macro-prudential tools are in insufficient to deal with financial-stability risks from the housing market says a jargon-filled IMF note - the Fund's usual method for releasing its analysis of one country's economy.
The warning comes less than a week after the IMF raised its UK growth forecast for the fourth time in nine months.
The note says that a steady increase in high-loan-to-income mortgages implies that households are gradually becoming more vulnerable to falls in income and interest-rate shocks suggesting that the BoE should stand ready to tighten these limits should current settings prove ineffective in reining in those risks.
The IMF dismisses the recent slowdown in mortgage approvals and consequent dip in house price growth as purely temporary. It says it notes some recent signs of deceleration in house prices, but these might only reflect a temporary slowdown as lenders learn new loan-approval procedures and adds that historical experience of the U.K.'s relatively large house price swings suggests caution.
The IMF also says the UK should ensure more new homes to provide a lasting solution to its housing market risks.
Comments
The population of this country is too high and getting higher. That is the major problem with not only housing but schools and the NHS etc.. The politicians will just not admit it and tackle it head on.
The alarm might be related to the discovery of how rampant the tax property haven are.
http://www.ft.com/cms/s/0/6cb11114-18aa-11e4-a51a-00144feabdc0.htmlsiteedition=uk#axzz38zlCaK3i
The new homes point just tacked on there at the end... it's the main issue! The housing shortage is getting ridiculous now, overcrowding and lack of affordable homes are becoming a major problem. They're calling 20-30 year old's the "clipped wing" generation because so many cannot afford to move out of their parents' homes!