LONDON (Reuters) - - Members of the Bank of England’s Financial Policy Committee differed over what steps to take to cool Britain’s housing market before reaching a consensus, Deputy Governor Jon Cunliffe said in an interview published late on Friday.
The Bank on Thursday introduced limits on the amount of mortgage lending British banks could do at high loan-to-income ratios, as well as imposing tighter affordability constraints on prospective home-buyers.
In an interview for Saturday’s edition of the Daily Telegraph newspaper, Cunliffe said members of the FPC had different views on the right action.
“Did we all think the same thing? No. Is that a good thing? Yes,” he said. “The idea is that you find a range of views, and then you try to find out where the consensus is. The committee came out with a consensus to act to limit the chance of (these risks) financially crystallising.” The Bank will publish a record of the FPC’s discussions on Tuesday.
Cunliffe stressed that the central bank was focused on controlling debt levels, rather than directly limiting rises in house prices.
“What worries me about the housing market (is) people want more housing than there is,” he said. “The moment they feel their income is going up or has a chance of going up then their preference is to want to buy houses. Supply is not keeping up with demand.”
British house prices are around 10 percent higher than a year earlier, and almost 20 percent higher in London.
The central bank has said that raising interest rates will only be a last resort to tackle risks from the housing market, a stance Cunliffe backed.
“If, over time, the only way you can deal with a financial stability risk is to divert monetary policy from the job of steering the economy to the job of dealing with the risk in the housing sector or somewhere else, there’s a cost to that,” he said.
Cunliffe serves on the Bank’s rate-setting Monetary Policy Committee as well as the FPC, which many economists expect to raise its record-low interest rates before the end of the year.
Cunliffe said the central bank would need to proceed cautiously, as the economy has become harder to read since the financial crisis.
“You have to be quite careful -- particularly when you’re at the zero bound -- because if you raise rates and the recovery dies out, you haven’t got much policy space.”
Reporting by David Milliken; Editing by Leslie Adler