Bank of England has given a stark warning that the recent surge in house prices could end in a crash, reports BBC.
Sir Jon Cunliffe, one of the Bank’s deputy governors, said it would be “dangerous to ignore the momentum that has built up in the housing market”.
He also warned about a possible “sharp correction, with negative equity and an overhang of debt for many households”.
His comments came amid reports that the UK’s most expensive flat ever has been sold for £140m.
Sir Jon, who has responsibility for financial stability, predicted that house prices would continue to rise for some time.
Earlier this week the Nationwide Building Society said prices had grown by 10.9% over the past year, the highest inflation rate for seven years.
Sir Jon suggested that the Bank’s Financial Policy Committee (FPC) may have to recommend action within the next couple of months.
“Whether and how to act further if, following the pause of the last couple of months, momentum continues to build, will be the most challenging judgement the FPC will have to take in the coming months,” he told an audience in London.
He said the recent new rules on mortgage lending – known as the Mortgage Market Review- may help to constrain house prices, but “they have not yet been tested”.
Options the Bank could now consider include limiting borrowing ratios, or forcing banks to hold more capital as security against loans.
Support for mortgages through the government’s Funding for Lending Scheme (FLS) was already withdrawn in January.