Charlie Bean, who sits on the central bank’s Monetary Policy Committee, noted the “noisy commentary” suggesting a new housing bubble was brewing. He said were particular concerns about the impact of the second part of Help to Buy.
However, he said mortgage approvals were still roughly half their pre-crisis average and house price inflation outside London was modest: “We appear to be still some way off seeing an unsustainable house-price boom on the back of excessive credit growth.”
Nevertheless, the central bank could not afford to be complacent, he added.
Bean also addressed the effectiveness of the Bank of England’s forward guidance. Businesses and households had absorbed the message that the central bank would not raise the Bank rate until the recovery was entrenched, he said.
While acknowledging there had been less of an impact on market interest rates, he argued this was a result of a recent UK economic upturn and speculation about whether the US Federal Reserve would begin a process of ‘tapering’ its quantitative easing policy.
However, forward guidance had helped to de-couple UK and US interest rate trends, Bean suggested.
