Cunliffe Concerned Housing Prices will Create Surplus of Debt
Rising house prices could pose a threat to the health of the UK economy, according to Bank of England deputy governor Sir Jon Cunliffe. Cunliffe has expressed concern over the high prices in the housing market creating increased amounts of debt which make the economy vulnerable. As long as housing prices are rising faster than the incomes of citizens the threat remains viable.
From October 1 the Bank of England has created a possible solution to increases in debt within the housing market. The rule states that lenders have only a certain amount of mortgage lending they have on hand. This rule has been specifically targeting the possible issues within the housing market which could potentially create problems in other parts of the economy; the very issue the Bank of England is trying to avoid.
Cunliffe commented on the concerns he as in regard to the housing market, saying: "Some months ago I thought the biggest risk at that point came from the UK housing market in Britain.
"And it's not the risk around house prices as such, it's the risk that we get a sustained rise in house prices - and this is very important - (the risk of) house prices rising faster than people's incomes.”
He added: "That leads to the sustained increase, a big increase in the amount of debt in the economy, in the amount of debt that mortgage holders have."
Other areas of the housing market have now cooled off including the number of remortgages approved during the month of June.