The surging housing market in Britain backed by rising prices could affect the economic recovery of the country, the Bank of England (BoE) Governor Mark Carney warned.
To meet with this, the bank could enforce a new affordability test for borrowers and advise the government to halt its controversial Help to Buy scheme that provides taxpayer-backed guarantees for homebuyers.
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Carney was quoted by Sky News as saying that they could do more, they could take steps around affordability to test whether or not individuals can afford mortgages at much higher interest rates.
"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," Carney told the publication.
"The biggest risk to financial stability, and therefore to the durability of the expansion, those risks centre in the housing market and that’s why we are focused on that."
In London, the house prices have already increased by 25% compared to the highest price in 2008, and is steadily rising at a rate of approximately 18% annually.
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By GlobalDataUnderlining the structural problems in the UK property market, Carney attributed the demand supply gap to the increasing value of the houses.
According to Carney, the problem with UK is that they are not building enough new homes. The number of new homes built in UK is half that of homes built in Canada, which has less population than UK.
