Bank powerless over London property prices, says governor
02-17-2014
Mark Carney plays down fears of bubble in wider market and says Bank of England has to set its policy for the entire country
Press Association
House prices
Average house prices in 43 areas have passed £1m. Photograph: Chris Ison/PA
The governor of the Bank of England has admitted it is powerless to control the soaring prices of prime property in London.
Mark Carney played down fears of a bubble in the wider market, dismissing suggestions that the coalition's Help to Buy scheme was having a significant effect. But he made clear that when it came to the boom in the most desirable areas of the capital – which many blame for stoking prices elsewhere – the Bank could do little more than watch.
"The top end of London is driven by cash buyers," he told the BBC's Andrew Marr Show. "It's driven in many cases by foreign buyers. We as the central bank can't influence that.
"We change underwriting standards – it doesn't matter, there's not a mortgage. We change interest rates – it doesn't matter, there's not a mortgage, etc. But we watch and we watch the knock-on effect. I will say that if you look at the UK as a whole everywhere, bar Northern Ireland, we are now seeing house prices beginning to recover."
Figures from Rightmove last week showed the average asking price in England and Wales had risen by £14,000 over the past year, to £243,861.
A report from the estate agents Savills and the analysts Property Database said average prices in 43 areas had passed £1m – 34 of them in London, and the remainder in the commuter belts of Surrey, Hertfordshire and Buckinghamshire.
Carney said the Bank had to set its policy for the entire country, and the wider market was seeing an "adjustment from very low levels". Prices relative to income were still below their peak "even in the hottest parts", he said.
"But we have to be very conscious, and we are very conscious, of the history, the economic history in Britain, and there is a history of boom and subsequent bust in the housing market. That's one of the reasons why the Bank of England has been given additional powers and one of the reasons, as of last November, we started to use those powers.
"So we've tightened up on underwriting standards, we've tightened up on capital standards, we've taken away special stimulus programmes that existed before."
In November the Bank and the Treasury announced that financial institutions would no longer be able to use the funding for lending (FLS) scheme to support mortgage loans. But Carney indicated there was little prospect of Help to Buy being reined in, describing its impact as "pretty small".
"It's all outside of London. It's for lower-priced houses as a whole and it's mainly first-time buyers," he said. "So it's not driving the housing market, but we have a responsibility to watch it and we will speak out if we are concerned."