Mark Carney: House-price boom poses 'deep, deep' threat to recovery, says Bank of England Governor

UK prices are soaring by more than 10 per cent a year as the number of homes built fails to keep up with demand

Rapidly increasing house prices pose a "deep, deep" threat to Britain's continuing economic recovery, Bank of England Governor Mark Carney warns today.

UK prices are soaring by more than 10 per cent a year as the number of homes built fails to keep up with demand, potentially creating a new housing bubble.

Mr Carney, who succeeded Sir Mervyn King as Governor last year, pointed out that his home country of Canada builds nearly twice as many houses than the UK, despite having half the population. "There are not sufficient houses built in the UK," he said in an interview with Sky News.

But he said there was little they could do about the "deep, deep structural problems" in the housing market, with demand for homes outstripping supply.

In his interview he said the Bank of England was watching to ensure the banks had enough capital to withstand the risks involved.

They were also checking lending procedures to try to ensure that mortgages were only issued to people who could afford them.

"By reinforcing both of those we can reduce the risk that come from a housing market that has deep, deep structural problems," he said.

Nevertheless, he said that there was evidence that large value mortgages - with loans of more than four times a borrower's salary - were on the rise again, with the risk that they could destabilise the economy.

"The biggest risk to financial stability, and therefore to the durability of the expansion - those risks centre in the housing market and that's why we are focused on that," he said.

"We don't want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term.

"We would be concerned if there were a rapid increase in high loan to value mortgages across the banks ... we've seen that creeping up and it's something we're watching closely.

Ultimately, he said, the real problem lay in the shortage of homes - with the UK building half the number of new homes that were being built in his native Canada, despite a much bigger population.

"The issues around the housing market in the UK...is there are not sufficient houses built in the UK," he said.

"(There are) half as many people in Canada as in the UK, (but) twice as many houses are built in Canada every year than in UK."

Housing Minister Kris Hopkins said: "In 2010 we inherited a broken housing market, but our efforts to fix it are working.

"We've scrapped the failed top-down planning system, built over 170,000 affordable homes, and released more surplus brownfield sites for new housing.

"We've also helped homebuyers get on the housing ladder, because if people can buy homes, builders will build them.

"Housebuilding is now at its highest level since 2007 and climbing. Last year councils gave permission for almost 200,000 new homes under the locally-led planning system, and more than 1,000 communities have swiftly taken up neighbourhood planning. It's clear evidence the Government's long-term economic plan is working."

Mr Carney surprised some analysts last week when he played down the prospects of an early rise in interest rates - despite the fears of a housing market bubble.

There is also evidence of a return to the pre-crisis housing market, where people could get a mortgage at four times their salary only to struggle to meet repayments.

Additional reporting by Press Association

News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
Life and Style
tech
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
tv
News
i100
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits