Rate rises 'failing to curb house prices'

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The Independent Online

Small tweaks in the Bank of England's base rate are unlikely to stem the runaway inflation in the UK housing market, according to a new report from the Council of Mortgage Lenders published today. The trade body, however, dismissed reports in the weekend press claiming it was calling for a doubling of rates to bring the market under control. It said it was still confident the housing market would see a soft landing.

Small tweaks in the Bank of England's base rate are unlikely to stem the runaway inflation in the UK housing market, according to a new report from the Council of Mortgage Lenders published today. The trade body, however, dismissed reports in the weekend press claiming it was calling for a doubling of rates to bring the market under control. It said it was still confident the housing market would see a soft landing.

In a special market briefing, the CML, which represents the UK's banks and building societies, said small rate rises were having "little or no impact on borrowers' behaviour" because they were being largely anticipated.

It added that interest rates would effectively have to "more than double to take house price growth below double-digits in the very short-term". However, it said that the CML saw such a move as "neither likely nor desirable".

Michael Coogan, the CML's director general, said weekend reports that claimed the CML believed rates had to be doubled to prevent a housing crash were "inaccurate" and "out of context". He said the trade body was not concerned that growth in the housing market yet posed any dangers to consumers, hence there was no need for any drastic measures.

Even Gordon Brown, the Chancellor, who is in New York at the G7 summit, dismissed the weekend press reports. "I think you will find that they are distancing themselves from comments that are attributed to one person at the CML.

"Our policy is to give the Bank of England independence to make the right decisions on interest rates and you have to realise that our arrangements and the [Bank's] proactive stance have led to the lowest interest rates for more than 30 years and the lowest inflation for 40 years," Mr Brown said.

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