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Bank willing to cool housing market

Estate agents' signs19/5/14

By Ian Lewis

Bank of England governor Mark Carney has admitted that steps could soon be taken to cool Britain's surging housing market.

The latest figures show that house prices are currently rising at a rate of 10% a year across the country, and significantly faster in some regions, prompting fears that a new property price bubble could derail the economic recovery.

A range of measures could therefore be introduced nationwide in a bid to make sure prices do not become unsustainable.

Affordability test

The Bank is toying with the idea of a new "affordability test" for borrowers, which would make sure people are able to repay their loans both now and in the future, while it is also considering the possibility of advising the government to rein in its controversial Help to Buy scheme.

"We could do more, we could take steps around affordability to test whether or not individuals can afford mortgages at much higher interest rates," said Mr Carney, speaking to Dermot Murnaghan on Sky News.

"We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice - the Chancellor has asked us if we would provide advice on changing the terms of Help to Buy - all those things are possibilities and we will consider them all."

Asset price bubble

Prime Minister David Cameron has said the Bank has all the powers it needs to prevent a new asset price bubble developing.

Deputy Prime Minister Nick Clegg, on the other hand, has said that ministers would have to act if the Bank requested that Help to Buy was curtailed.

Mr Carney has expressed particular concern about the return of large mortgages - which are more than four times a borrower's salary in some cases.

Mortgages of this nature were heavily associated with the financial crash of 2008.

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