Britain should take action over soaring house prices, perhaps by scaling back the government’s mortgage guarantee scheme, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.
Britain’s housing market, buoyed by record low interest rates and government-sponsored schemes, has been a driver of the country’s surprisingly fast, consumer-led economic recovery.
“Monetary policy tightening should be accompanied by timely prudential measures to address the risks of excessive house price inflation,” the OECD report said.
“House prices … significantly exceed long-term averages relative to rents and household incomes.”
House prices surged last month at the fastest pace since the start of the financial crisis and the focus is turning to the Bank of England’s ability to prevent a damaging property bubble without raising interest rates sooner than it is planning.
The Bank has mostly played down suggestions that the market is overheating. But last week one of its deputy governors, Jon Cunliffe, told bankers it would be “dangerous” to ignore the rapid rise in prices, which are up nearly 11% over the past year.
At the end of last month, tighter rules on mortgage lending were brought in requiring more rigorous checks on whether borrowers can afford their loans. A meeting of the Bank’s Financial Policy Committee in June may bring in more measures.
The OECD said further action on housing might include “tighter access” to the government’s Help to Buy programme, which provides guarantees for higher-risk mortgages in an attempt to help first-time buyers into the market.
via The Guardian