Last year the Bank of England implemented tools which were supposed to cool off the UK housing market and assist in preventing another breakdown such as 2007. These tools were effective during the implementation last year and still are. However, the housing market is once again gaining steam and seeming as though it could have the momentum to create issues which mushroom out of control. This has led the Central Bank to issue warnings which claim household debt levels could pose risk to the stability of the UK financial system.

Household debt, especially the debt pertaining to mortgage lending, is growing. The primary reason is house prices continue to escalate faster than incomes. This has been an issue for many years, although it is now posing a serious risk to the financial stability which exists today.

Sir Jon Cunliffe with the Bank of England is concerned about how much debt house owners are taking on. He commented on the negative impact of increasing house prices.

Cunliffe said: “Our concern is not so much about house prices, it is the chain between high house prices, prices growing faster than people's incomes, and people having to take out bigger and bigger mortgages and the debt that families then have relative to their income growth.

“It is that debt-to-income (ratio) of British households that creates the risk.”

He added: “We are not seeing the sort of growth in momentum we saw this time last year, but given the high level of debt to income we have in the UK anyway, and the ability of this market to move very fast, this is something we need to watch and that's why we have left that insurance policy in place.”