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No panic about the housing market

One individual on the central bank committee involved in setting interest rates has indicated that future rate increases will probably not be dramatic in nature.

Ben Broadbent, of the Bank of England, has said:


“What really matters is not just house prices per se but whether there is a lot of credit growth on the back of that. Currently there isn’t a great deal. It’s clearly something the Bank and the financial policy committee (FPC) will want to keep an eye on.”


Without raising interest rates, the Bank has already intervened to limit mortgage demand by trying to promote business lending instead. The Bank has the capacity to take action in relation to lending standards for mortgages; this could help to ensure that only individuals with the wherewithal to take on mortgages were given the opportunity of proceeding down that path.

If an increase in interest rates was deemed necessary, Broadbent has suggested that the size of the rise would be limited and that its speed would be slow. This reassurance ought to mean that people with mortgages can have some faith in the stability of the housing market. This may lead to more home improvements being made. Woodblock flooring in the Wirral could well become even more popular than it is now.

Broadbent has argued that the timing of the initial rise in interest rates was not critical. From his perspective, it is the general direction of policy which is of genuine significance. An abrupt increase in interest rates could have a negative impact on the wider economy, so another policy choice is likely to be adopted.

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