Bank of England's Mark Carney warns on housing market

Mark Carney Bank of England chief Mark Carney says the housing market has the potential to wreck the recovery

The governor of the Bank of England has given his strongest warning yet about the dangers to Britain's economy posed by the booming housing market.

Mark Carney said the market represented the "biggest risk" to financial stability and the long-term recovery.

He added there were deep structural problems which needed to be addressed.

He told Sky News the fundamental problem was a shortage of homes - and the Bank of England had no solution to that.

In an interview on the Murnaghan show, he said the Bank was "closely watching" rising property prices and the subsequent increase in large-value mortgages, which he warned could lead to a "debt overhang" which could destabilise the economy.

'Making progress'

Start Quote

There are not sufficient houses built in the UK”

End Quote Mark Carney

Mr Carney said: "When we look at domestic risk, the biggest risk to financial stability and therefore to the durability of the expansion [of the economy]; those risks centre in the housing market."

He added: "There are not sufficient houses built in the UK. To go back to Canada, there are half as many people in Canada as in the UK, twice as many houses are built every year in Canada as in the UK and we can't influence that."

Official government figures show the country began work on 133,650 homes in the year to March, a rise of 31% on the year before.

A former government advisory body has said the UK needs to build almost 300,000 homes a year until 2031 to meet current demand.

Prime Minister David Cameron, who was also interviewed by Murnaghan, admitted the government needed to build more houses and said Mr Carney was "absolutely right".

He said: "The building of houses is going up. If you talk to any housing developer at the moment, or builder, they will tell you that the Help to Buy scheme... has been hugely helpful in bringing forward more development or house building."

The deputy prime minister, Nick Clegg, echoed that point. He told the BBC's Andrew Marr: "The big long-term problem is that we simply do not build enough homes in this country."

But Mr Clegg also said the government should scale back its Help to Buy scheme, if the Bank concluded the housing market was overheating.

Mr Carney said he was watching the housing market closely, and would tell the chancellor if he believed changes needed to be made: "We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice. The chancellor has asked us if we would provide advice on changing the terms of Help to Buy."


Mr Carney said the Bank had an important role behind the scenes: "What we can influence is whether the banks are strong enough.

"Do they have enough capital against risks in the housing market, whether underwriting standards are tough enough so that people can get mortgages if they can afford them?

"And by reinforcing both of those we can reduce the risks that come from a housing market that has deep, deep structural problems."

Housing analyst Henry Pryor said the Bank was also acting to ensure people did not borrow more than they could afford: "What they are doing is bringing in these new regulations [which include a series of tougher questions about ability to repay] to make it much harder, much tougher, for those of us who need a mortgage in order to buy a house, to actually qualify for one.

"And it's tricks like that, it's little wrinkles like that, that the Bank of England are going to use in order to try and dampen down over-enthusiasm in the housing market."

Major lenders calculate house prices are rising at roughly 10% a year - the highest since the credit crisis of 2008.

The interactive content on this page requires JavaScript

UK house prices

Year on year % change


The average UK house price is around £180,000.

'Reduce dividends'

Start Quote

It's a balance that Mark Carney's got to walk and that's why he says it's such a big threat”

End Quote David Blanchflower Ex-Monetary Policy Committee member

The governor's warning comes amid a rising a chorus of concern.

Sir Jon Cunliffe, one of the Bank of England's deputy governors, previously said it would be "dangerous to ignore the momentum that has built up in the housing market".

The region where prices are rising fastest - at double the national average - is London and the South East.

But Mr Carney said that situation was beyond his control - and was not a threat to the rest of the country: "There is a large cash market in London, a particularly foreign aspect to it. From our perspective they don't cause risk to the British economy."


More on This Story

The BBC is not responsible for the content of external Internet sites


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 725.

    There is an obsession with house prices but the fact is throughout the 20th century prices ran at about 10 times average salary

    The reason that didn't really matter is that wages increased so quickly that 10 years later that mortgage they beggared themselves to pay originally is then easily affordable

    Boom of globalization that caused that is over, we're just back to where we were before

  • rate this

    Comment number 701.

    For those, including Clegg, pointing the finger at the "Help to Buy" scheme, I'd like to point out that there are an awful lot of people out there still struggling to buy. No, the help to buy scheme is not the problem. The problem is that house prices have been inflated, primarily, by people buying property for investment but also by greedy estate agents, cashing in on the end of the lean years.

  • rate this

    Comment number 697.

    All subsidies and attempts to fiddle the market should be stopped. Allow the market to reach is natural level. Market forces left alone will sort things out.

  • rate this

    Comment number 690.

    One way to alleviate the housing problem is to start discouraging property speculation which is rampant in Great Britain. Other big economic countries in the EU have long recognised that this ruinous to the economy and have combated this by implementing special rules/laws. Why can't Britain do the same ?

  • rate this

    Comment number 689.

    For decade & more all the economic growth has ended up in housing. Once upon a time that growth was shared out a bit by decent interest rates, so everyone shared in growth a bit. For a couple of decades, and in extreme now, all benefits go to the rich house buyer. They use poor people's cash savings for next to nothing. Then keep all the growth to themselves. It's not rocket science get rates up.


Comments 5 of 34


More Business stories


Business Live

    08:16: Paper review

    The Guardian splashes on a report from the Institute for Fiscal Studies which claims young workers have been hit hardest by a squeeze in standards of living. The FT digests Shell and US rival ConocoPhillips's investment cancellations. The Wall St Journal says bets against currency pegs, like Denmark's krone with the euro, are on the rise following Switzerland abandoning theirs. The Telegraph reports on a likely windfall for gas companies as wholesale costs drop.

    Google results Via Twitter Stephen Shankland Senior writer at CNET News

    tweets: Google's capital expenditures jumped $1.13 billion sequentially to $3.55 billion in 4Q2014. Data centers ain't cheap.

    07:50: Market update

    Japan's Nikkei index added about 0.4%, clawing back some of the 1.1% lost yesterday, while the Hong Kong Hang Seng index dropped 0.1%, to 24,570.01. Japanese factory output rose 1% from the previous month, below forecasts, while household spending fell more than expected, down 3.4% on a year ago.

    07:33: PPI investigation

    The Financial Conduct Authority, the City watchdog, is planning to "gather evidence on current trends in complaints on payment protection insurance," it says. It could then decide to do an advertising campaign, a time limit on complaints or keep things as they are.

    07:25: BT results

    BT have updated everyone on their pension fund situation and how they will deal with a £7bn deficit. BT will pay £1.5bn into the fund by the end of April 2015. This will be followed by £250m in each of the years to March 2016 and March 2017. Low interest rates have hit the fund.

    07:16: Qatar Airways
    Qatar Airways plane

    Qatar Airways has acquired stake of just less than 10% in BA and Iberia-owner IAG. There's a cap on non-EU ownership of European airlines, but Qatar Airways might up its stake in future, it says.

    07:05: BT results

    BT says third-quarter earnings before tax and interests costs rose 2% to £1.57bn. Gavin Patterson, chief executive says: "All the major communications providers are responding to the strong market demand for fibre broadband, helping to drive take-up in what is already a very competitive market."

    06:57: US growth data BBC Radio 4

    US growth figures will be reported later on. What's the likely result, Today asks Ewen Cameron Watt of Blackrock? "The rate of growth is slowing a little bit but not enough to raise serious concerns," he says. Expect a "stable but robust rate of growth."

    06:45: Greece Radio 5 live

    Guntram Wolff is the director of European think tank Bruegel, and he's on 5 live, talking about Greece. "It was a mistake that Greece joined the euro, but it would now be a mistake for it to leave," he says. "We will have to come to a deal that will have a lower burden on Greece. I essentially think you will keep the nominal amount [owed to bond investors] but you will increase the maturity.. from 30 to 40 or 50 years."

    06:30: Amazon results Radio 5 live

    More from Ewen Cameron Watt of investment manager Blackrock on 5 live. He is giving his views on US results overnight. "Amazon and Google both essentially reported that underlying demand over Christmas was pretty decent," he says. After tax, margins at Amazon are below 1%, he says.

    06:20: Trademark news Radio 5 live

    The phrases "this sick beat" and "nice to meet you, where you been" have been trademarked by singer Taylor Swift, 5 live reports. Laura Harper of law firm Shoosmiths says she is trying to stop other people making money by putting the phrases on a t-shirt or other merchandise. She will have to prove the phrases are "synonymous" with her, she says.

    06:09: Shell results Radio 5 live

    Ewen Cameron Watt of Blackrock is the markets guest on 5 live, talking about yesterday's results from Shell. "These are very historic results because they reflect an average price of $75" per barrel of oil, he says. Bearing in mind oil is below $50 today, "the pain is yet to come," he adds. The firm has cut $15bn of investments. The longer the price remains at this level, the more likely more investment cuts will come, he says.

    06:01: House building Radio 5 live

    Figures from the National House Building Council show there was a 9% rise in homes built last year to 145,174, but the rise missed the government's 200,000 home target. Peter Vella of Countryside Properties is on 5 live. NHBC's figures don't take into account all homes started or built, so the industry could be closer to the target than thought.

    06:00: Howard Mustoe Business reporter

    Good morning all. Overnight, online retail giant Amazon has reported weaker profits for the busy Christmas period. Stay tuned for the best business and economics news and get in touch via email or on twitter @BBCBusiness



Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.