Mortgage lenders demand rate rise
Fears of a crash in the housing market mounted last night after the Council of Mortgage Lenders took the unprecedented step of urging the Bank of England to raise interest rates.
A "modest" move was needed to ensure the housing market enjoyed a "soft landing", rather than a repeat of the 1980s crash, which left millions in negative equity, said the council, which represents nearly all of Britain's banks and building societies.
The intervention, which one housing expert described as "turkeys voting for Christmas", marks the first time in the organisation's 13-year history that it has spoken out on interest rate policy, and reflects growing concern among lenders that the market is overheating.
George Buckley, a UK economist at Deutsche Bank, in the City, said the CML's unusual step "reflects serious worries about the sustainability of house price rises and the accumulation of mortgage debt".
The council's leaders held a meeting in Whitehall yesterday to discuss long-term policies to help homeowners. They met Lord Rooker, the Housing minister, and Malcolm Wicks, parliamentary under-secretary at the Department of Work and Pensions, to discuss how to make home ownership "more secure".
Annual growth in house-price inflation hit 18 per cent last month, according to the Halifax, a level not seen since the 1980s boom, as homebuyers rushed to take advantage of interest rates at a 38-year low of 4 per cent.
The lenders' council is worried that the longer the Bank waits to hike rates, the higher rates will have to go to quell inflationary pressures. Michael Coogan, the organisation's director general, said: "A modest rise in interest rates this summer would help ensure that the housing market is sustainable in future without causing payment difficulties for the overwhelming majority of borrowers."
But with inflation falling and high street spending at a two-year low, the City does not expect the Bank of England to raise rates until August.
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