The Government last night gave the green light to the Bank of England to order further increases in interest rates to prevent the crash in the property market.
In a signal of fresh rises in mortgages, Gordon Brown, the Chancellor, said that the Government would be "vigilant at all times". But he insisted that the housing market was "strong" in comments that will be seen as an attempt to play down warnings from the Bank of an imminent price crash. In his Mansion House speech to the City of London, the Chancellor insisted that he would do nothing to undermine Labour's "hard-won" economic stability.
"With financial markets expecting interest rates to rise around the world as the world economy turns upwards, we will continue to support our monetary authorities in the difficult choices they have to make."
Economists and industry analysts will see the language as a sign that the Government supports the Bank's plan to raise rates now to cool the housing market before it turns into a potentially destructive speculative bubble. Mr Brown listed house prices as one of the main global risks facing the UK economy along with oil prices and the need for continued discipline on public spending.