Deputy governor Andrew Bailey says the Bank of England is closely monitoring the housing market for signs of a bubble and will intervene if necessary.
In an interview with the Sunday Telegraph, Bailey said the Prudential Regulatory Authority (PRA), which he heads, could intervene to and order banks to hold larger cash reserves or reduce the loan-to-value ratios offered.
‘We are watching the housing market very carefully,’ he said. ‘We’ve laid out the tools that we can use. We have set out our desire to see robust mortgage underwriting standards [and that] will be part of our approach.
‘The thing I stress is that we will use those tools.’
Although Bailey (pictured) said that he does not believe that the UK housing market is in bubble territory yet, monitoring it will be a priority next year. Bailey’s warning comes as business secretary Vince Cable called for a review of the government’s flagship Help to Buy scheme, which he said is fuelling a ‘raging housing boom’ in London.
Last week, the Royal Institute of Chartered Surveyors predicted that house prices will rise by a further 8% in 2014, while the Council of Mortgage Lenders said gross lending will reach £170 billion in 2013, ahead of its expectation of £156 billion. However, this remains some way off the £363 billion advanced in 2007 at the peak of the house price market.