Speaking to the Treasury Select Committee, the central bank’s top economists also raised the prospect of further forward guidance.
Mark Carney acknowledged the housing market is gaining momentum but dismissed fears of reckless mortgage lending.
He told MPs mortgage lending remains at three-quarters of historic averages: “There is some room. It is important that underwriting standards are maintained.”
Asked about buy-to-let lenders’ restrictions on longer-term tenancies, he said he welcomed the decision by Nationwide to take a more flexible approach. However, he added it was a matter for institutions: “From a landlord’s perspective it makes the uncertainty of servicing any mortgage that much higher if you have a longer-term tenancy.”
In a rebuttal to MPs’ suggestions that the Bank of England’s forward guidance on interest rates is hard to understand, he said the businesses he spoke to understood the main points: “They understand the core thrust of the policy, which is there is going to be exceptional monetary stability.”
The governor, who was head-hunted by George Osborne for the role, mostly kept his cool under questioning. However, when Labour MP John Mann suggested he was selective in his use of statistics, Carney said he was “more than mildly offended”.
Carney’s colleague and fellow Monetary Policy Committee member Charlie Bean stressed the Bank of England will not automatically raise the Bank Base Rate when unemployment hits 7%, the threshold identified in the Bank’s August forward guidance.
He said it could be “perfectly sensible” to issue more guidance at that point based on a 6.5% unemployment rate: “I am not saying changing the existing guidance but there may be guidance that comes after.”
