Advance Exoneration of the BoE
BoE governor Mark Carney, who has already left one of the biggest housing bubble’s in modern history in his wake in Canada, is evidently aware that he has a similar problem in the UK as well. There are two aspects of the revived UK housing bubble he indeed has no control over, which allows him to fashion excuses for the central bank in advance (just in case the bubble bursts one day – which it will, the moment interest rates rise). Carney is at least to be commended for admitting that there might be a problem – after Bernanke’s widely publicized housing bubble forecast gaffes in 2006/7, central bankers have apparently become more careful – but he cannot escape responsibility for being one of the major central planners in the UK economy.
According to Reuters:
“Bank of England Governor Mark Carney gave his strongest warning to date about the risks of a housing bubble and said the Bank was looking at new measures to control mortgage lending amid a shortage of home building.
The British housing market has “deep, deep” structural problems, chief among them insufficient construction of new homes, Carney said in an interview with Sky News television broadcast on Sunday.
“When we look at domestic risk the biggest risk to financial stability, and therefore to the durability of the expansion, those risks center in the housing market and that’s why we are focused on that,” he said.
Helped by a recovery in the economy, record-low interest rates and government schemes to help home buyers, British house prices jumped about 10 percent in the 12 months to April, raising concerns that buyers will take on too much debt.
Carney has previously said the Bank will seek to use its new powers over credit before it resorts to raising interest rates.
He made clear on Sunday that he saw the biggest problem in the property market as the shortage of new homes, saying twice as many houses were built each year in his native Canada than in Britain which has double the population.
Construction started on more new homes in England last year than at any point since 2007. But at 123,000 units, house-building remains short of the 200,000 which many economists consider to be the minimum needed each year.
“We’re not going to build a single house at the Bank of England and we can’t influence that,” Carney said.
Also speaking to Sky News, Prime Minister David Cameron said Carney was “absolutely right” to point to the lack of housing but said government programs were helping to get more built.â€
