Mark Carney says UK housing market in widespread recovery

 
Mark Carney Mark Carney said there was little he could do to cool the London market

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Bank of England governor Mark Carney says the UK housing market is generally recovering.

Mr Carney told the BBC's Andrew Marr programme that, looking at the UK as a whole, "we are now seeing house prices begin to recover, so it is a more generalised phenomenon".

He said the only area where prices had not picked up was Northern Ireland.

He also said there was little the bank could do to cool the London market, where prices were rising far faster.

Cash

Prices in London are rising by about 10% a year, but Mr Carney said a change in interest rate policy - not on the cards in any case until the recovery is well established - would not cool the market as a significant number of properties were bought without a mortgage.

Asked if he was concerned about the very fast-spiralling London property market, Mr Carney said: "Much of what's driven in London, of course, is not mortgage-driven but is cash-driven.

"It's driven, in many cases, by foreign buyers. We, as a central bank, can't influence that.

"We change underwriting standards - it doesn't matter, there's not a mortgage. We change interest rates - it doesn't matter, there's not a mortgage, etc.

"But we watch it and we watch the knock-on effect."

'Clarity'

Mr Carney reiterated his belief that UK interest rates would not return to pre-crisis levels of around 5% until all spare capacity was being used in the economy.

He said: "What we've had thus far is a consumer-led recovery.

"What we haven't seen yet is business investment picking up.

"It's part of the reason why we're trying to provide as much clarity to business that the path of monetary policy, the path of interest rates, is going to be calibrated very carefully, to ensure that only when we see sustainable growth in jobs, in incomes, and in spending will we make adjustments."

Last week, Mr Carney overhauled the Bank's interest rate policy to reflect falling unemployment and the economic recovery.

The Bank's rate policy will now be determined not just by unemployment, but by a wider range of indicators.

Limits

Mr Carney also discussed bankers' bonuses, saying new rules ordering banks to keep back more capital could hold back bonus payouts.

He said the rules, designed to protect banks from future economic shocks, would prevent them from paying increased bonuses if that would cause capital levels to fall.

The rules, known as Basel III, will come into force near the end of this decade and will apply internationally.

Mr Carney said they would have a real impact and should change banks' behaviour.

He also suggested that bonuses could be deferred for an even longer period than the current three to five years, giving a greater time frame in which they could be clawed back, should it emerge later on that unnecessary risks had been taken.

Last week, Barclays increased its bonus pool despite posting a fall in annual profits.

 

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  • rate this
    +32

    Comment number 404.

    For a long time our economy has been based on house prices it has been a case of passing the buck to the next generation instead of paying tax and have the government spend money on Roads sea defenses and social housing we have been giving it to the bankers in interest rates their is a lot of people property rich and cash poor

  • rate this
    +101

    Comment number 119.

    Why do we have to wait until the end of the decade before new banking rules come in? The financial crisis caused by the bankers didn't have to wait and the financial hardships suffered by hundreds of millions of ordinary people are happening NOW! Why should they wait, just for the benefit of a privileged few?

  • rate this
    +44

    Comment number 114.

    The sad thing is that even when the party in power changes after May 2015 nothing will really change for the majority of the population.

    When politicians say that "we are all in this together" and are "one nation" you know the opposite is true.

  • rate this
    +64

    Comment number 109.

    Is this man always going to tell us the obvious, and change the goalposts each time his predictions fail to materialize?

    I am distinctly unimpressed by his performance to date, and allowing house prices to run away through ridiculously low mortgage rates will ultimately bring much sorrow to those borrowers who, when rates rise, discover they can't meet the interest, let alone repayments.

  • rate this
    +155

    Comment number 91.

    So prices are rising, but the majority of buyers have no mortgages. So the rich are investing, buying to let, renting out at immense profit, and the UK population still can't buy their first house. Prices need to come down, not rise further. We all thought we were rich because we owned our own home, it was a lie, the real property owners don't live in most of their properties.

 

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