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October 21, 2013 12:00 am
Interest rates could rise significantly before UK homeowners found it difficult to meet mortgage repayments, Ben Broadbent, a member of the Bank of England’s Monetary Policy Committee, said on Sunday.
An upswing in the UK housing market has sparked fears that the government’s Help to Buy scheme – a combination of equity loans and guarantees for higher-risk mortgages – will help to inflate prices and burden people with debt they might later struggle to repay.
However, the BoE’s Financial Policy Committee said last month that the housing market’s recovery did not pose a risk to financial stability, with activity still below its historical average and debt servicing costs low.
“Although interest rates will at some point start to rise, you’ve got to remember quite how low a level we are starting from,” said Mr Broadbent in an interview on Sky News.
Although he said the BoE would not raise rates until the recovery was “on a secure footing”, he added: “I think there is a fair amount they could go up before borrowers got into great difficulties.”
Other MPC members take a similar view. Paul Tucker, the BoE’s outgoing deputy governor, told the Financial Times last week that the BoE did not need to address “every boom or boomlet”. His successor, Sir Jon Cunliffe, told a parliamentary committee: “From where I am now, it doesn’t look like we are in a bubble.”
However, a survey published on Monday by Rightmove, the property website, underlines the divergence between a resurgent London property market and the more muted recovery seen in other parts of the country.
Asking prices in October were on average 13.8 per cent higher in Greater London than a year earlier, after fluctuating over the summer, Rightmove said, against an average national increase of 3.8 per cent.
The survey mirrors data published last week by the Office for National Statistics showing that house prices in London rose 8.7 per cent in the year to August, compared with a national rise of 3.8 per cent.
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