Business

Osborne: 'Let's not pretend there's a housing boom'

George Osborne
Image caption The chancellor is "alert to the risks" of a boom in house prices

Chancellor of the Exchequer George Osborne has denied that the UK housing market is overheating.

Answering questions at the annual meeting of the Institute of Directors he said: "Let's not pretend there's a housing boom".

The chancellor pointed out that housing sales and mortgage approvals are still well below the boom years.

In August, UK house prices rose at the fastest rate since June 2010, according to the latest survey by the Halifax.

Vigilance

The chancellor said that he, along with the Bank of England, was "alert to the risks" of a housing boom.

He said that the Bank of England had a responsibility to look at risks as they emerge in the economy "like asset price bubbles".

Last week, Bank of England governor Mark Carney told MPs "we do need to be vigilant" on house prices.

Addressing the Treasury Committee, he said the central bank had a "considerable range of policy options" that would start with "more intensive supervision of mortgage lending".

However, Mr Carney said that not all of the country had seen a recovery in house prices.

He stressed that across the nation, house prices in many areas were only at two-thirds or three-quarters of pre-crisis levels.

Government support

There have been some concerns that government measures could lead to a housing bubble.

Two government schemes are having an impact on the mortgage industry and housing market.

Under the Funding for Lending Scheme (FLS), banks and building societies are able to borrow money relatively cheaply from the Bank of England, providing they lend that money out again.

FLS is widely credited with bringing down mortgage rates since it started just over a year ago.

Meanwhile the Help to Buy scheme, which began in April, allows buyers of new-build homes to put down a 5% deposit and take out a government loan for up to 20% of the value of the property.

From January, the scheme will be extended to help buyers of existing homes.

Business Secretary Vince Cable has questioned whether the second part of this scheme should go ahead.

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