The Bank of England will need to consider raising interest rates to rein in Britain’s housing market if controls designed to curb risky lending prove insufficient to see off the threat to financial stability, the International Monetary Fund said.
While suggesting that Threadneedle Street keep rates at 0.5% for now, the Washington-based Fund made it clear it was carefully watching the UK for signs of a new property bubble developing.
It expressed some reservations about whether limits on mortgage lending announced by the Bank in recent months would be enough to prevent another damaging property bubble.
But it warned that the Bank would have to be cautious in deploying its biggest weapon because of the possibility of damage to the wider economy.
Last week, the Bank’s financial policy committee said it wanted statutory powers to compel lenders to limit the size of a home loan both in relation to the value of the property and the income of the borrower.
But in its half-yearly World Economic Outlook, the Fund said that buoyant housing markets were posing policy challenges in a number of Western countries, including the UK.
via The Guardian
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