LONDON: Prime Minister David Cameron yesterday gave his strongest signal yet that Britain may need to cool its red-hot property market, saying he agreed with the Bank of England that the housing market was the biggest risk to financial stability.
House prices are soaring in London and have risen by a tenth over the past year in Britain as the economic recovery and record-low interest rates tempt purchasers back into one of the world’s most expensive property markets.
But Bank of England Governor Mark Carney warned on Sunday that the housing market posed the biggest domestic risk to the financial stability of Britain’s $2.5 trillion economy.
“I agree with everything he said in his interview,” Cameron told BBC radio. “It is absolutely right that we are alert to any dangers and problems.”
Cameron also said he would consider scaling back the government’s ‘Help to Buy’ mortgage guarantee scheme if Carney advised such a step would be prudent.
Carney, who has repeatedly refused to be drawn on whether he sees signs of a property bubble in London, said the British housing market has “deep, deep” structural problems, chief among them insufficient construction of new homes.
Such stark warnings from Carney and now Prime Minister Cameron indicate a growing acceptance that something needs to be done to cool the market, especially in London where even some estate agents admit the soaring prices are unsustainable.
Cameron’s coalition government has faced calls from the opposition Labour party to scale back its ‘Help to Buy’ mortgage guarantee scheme which Cameron launched last year on the eve of the Conservative Party conference.
When asked if the government would consider changing the scheme to reduce its upper borrowing limit, Cameron said: “Of course. We will consider any changes that are proposed by Mark Carney.”
‘Help to Buy’ allows people to buy property worth up to £600,000 ($1.01m) with deposits as low as 5 percent.
Carney said the BoE was checking the programme, which he said was targeted and relatively small though he cautioned it could grow a lot.
Reuters
