He acknowledged that the transition to low inflation can be "acutely painful". House prices in Britain have fallen for the past three years - only the second time they have done so in the past half century, he said.
The Governor's remarks are likely to renew calls for measures to help home-owners, particularly those with "negative equity" - a home worth less than the mortgage on it. There are more than 1 million households caught in this position, and perhaps 750,000 with insufficient equity to be able to move house easily.
Ministers have been trying to fend off demands for steps to revive the housing market, although there has been a flurry of research into possible measures at the Treasury and the Prime Minister's policy unit in recent months. But all the signs are that the market is still, at best, stagnant. Reductions in social security payments to home-owners which take effect next month will make matters worse, according to lenders.
Mr George said that house prices are more volatile than the general price level because housing demand is particularly sensitive to expectations. He added that demand for houses as an investment to protect people against inflation would also with low inflation and house prices could grow more slowly relative to overall prices.
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